China’s exports decelerate on disruption from Gulf war, seasonal distortions

Spillover from the war in the Gulf, coupled with seasonal distortions, slowed China’s export activity in March, with exports inching up just 2.5% y-o-y — down from a near-40% rise in February, according to General Administration of Customs data. The drop was led by exports to the US, which were down more than 26% y-o-y during the month.

Meanwhile, the trade balance was thrown further out of whack as imports rose at the fastest pace since 2021, increasing 27.8% y-o-y. The rise came on the back of higher purchases of refined oil products, textile yarn, fabric, and copper — all up at double-digit rates — alongside integrated circuits, which surged on AI-related demand.

Higher energy costs from the regional conflict squeezed manufacturer margins and weighed on outbound shipments. Seasonality also weighed, with the later-than-usual Lunar New Year holiday also reducing working days. Also not helping the picture is an unfavorable base effect from the previous year, when manufacturers pushed out eleventh-hour exports ahead of US tariffs coming into effect.

“This unexpectedly weak growth in exports is probably not driven by slowing external demand,” Mizuho Securities’ senior economist Serena Zhou told Bloomberg. The robust performance in high-tech exports and processing imports during the same period indicates that the broader export trend remains solid.

One bright spot in China’s exports story is circuits. Global AI-driven investment fueled a rally in memory chip prices and boosted export growth across Asia, helping to raise China’s circuit exports by 78% y-o-y in 1Q 2026, while high-tech exports jumped by 30%.

A US Supreme Court ruling striking down US President Donald Trump’s tariffs on Chinese imports also eased pressure on Chinese exports. Trump’s decision had pushed duties as high as 145%.

What’s next?

China’s green exports could be in for a boom as oil prices rise: The Iran conflict could support demand for Chinese green exports, including solar panels, with overseas sales of Chinese electric and hybrid vehicles having already doubled in March. These green alternatives are gaining greater appeal since oil prices went up and global supply chains went into chaos during the conflict.

The US blockade of the Strait of Hormuz is expected to lead to an increase in energy and production input costs, decreasing margins for Chinese manufacturers even further. Disrupted shipping routes also risk delaying exports and raising logistics costs, while elevated oil prices could trigger tighter monetary policies and weaken global demand.

MARKETS THIS MORNING-

Asian markets advanced in early trading amid optimism, echoing Wall Street’s gains of yesterday as traders pine for an end to the war in the Gulf — and cheer record bank earnings in New York. Japan’s Nikkei rose c. 2.2% while South Korea’s Kospi advanced 2.1%. Futures suggest Wall Street should open in the green today.

THE CLOSING BELL-

The EGX30 rose 1.50% yesterday on turnover of EGP 9.4 bn (39.0% above the 90-day average). Local investors were sole net buyers. The index is up 21.3% YTD.

In the green: Orascom Development (+6.5%), Palm Hills Developments (+3.9%), and Heliopolis Housing (+3.4%).

In the red: Arabian Cement (-2.0%), Egypt Aluminum (-1.6%), and Qalaa Holdings (-1.0%).