China’s export engine is losing momentum under the pressure of the war in the Middle East, even as imports accelerate on the back of stronger domestic demand and precautionary stocking by producers. The combination is sharply narrowing the country’s trade surplus and exposing how vulnerable global supply chains remain to geopolitical shocks in strategic choke points such as the Strait of Hormuz.
According to data from China’s General Administration of Customs, the country’s exports in March 2026 rose by just 2.5% year-on-year to 321 billion dollars. That is a dramatic slowdown compared with the robust 21.8% annual growth recorded in the combined January-February period. In contrast, imports surged 27.8% in March to 269.9 billion dollars, accelerating from the already strong 19.8% increase seen in the first two months of the year.
This divergence between sluggish export growth and fast-rising imports has had an immediate effect on China’s external balance. The trade surplus in March stood at 51.1 billion dollars, a sharp drop from the 213.6 billion dollars accumulated over the first two months of the year. While China remains comfortably in surplus overall, the March figures highlight how quickly the balance can shift when external shocks hit transport routes and energy markets.
Customs spokesperson Lu Daliang linked the March slowdown directly to escalating conflict in the Middle East. Attacks by the United States and Israel on Iran, followed by Iranian retaliatory strikes, have intensified tensions in and around the Persian Gulf. As a result, shipping through the Strait of Hormuz – one of the world’s most critical maritime arteries for energy and commodity flows – was largely disrupted. This disruption has driven up fuel prices and freight costs, pushing production and logistics expenses higher worldwide.
Lu underlined that the spike in energy prices and transportation costs is not just a regional problem. Higher fuel bills feed into the cost of operating ships, trucks and planes, while rising insurance premiums on vessels transiting conflict zones further inflate logistics expenses. These increases ripple through global supply chains, raising production costs for manufacturers and ultimately putting upward pressure on consumer prices in many countries.
China is particularly exposed because of the central role the Strait of Hormuz and the Persian Gulf play in its energy security. Around 45% of the crude oil imported by China and about 30% of its liquefied natural gas (LNG) supplies pass through the Gulf and the Strait before reaching Chinese ports. Any prolonged disruption in tanker traffic therefore threatens not only current supplies but also contract reliability and future pricing, complicating planning for Chinese refiners, utilities and industrial firms.
The Strait of Hormuz connects producers such as Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Iraq and Iran to global markets. It is the main corridor for roughly a quarter of internationally traded oil, about one-fifth of global LNG shipments and nearly 30% of the world’s fertilizer trade. When traffic here is interrupted, even partially, the impact is felt across multiple commodity markets – from fuel to food – since fertilizer availability directly affects agricultural production costs.
In this tense environment, China’s trade with Middle Eastern partners has been directly hit. Both exports from China to the region and imports from those countries declined during the period in question, reflecting logistical delays, security concerns and higher costs of doing business. Some companies have postponed shipments; others have sought alternative routes, which are longer and more expensive, reducing the competitiveness of Chinese goods and squeezing margins.
Yet even as external demand encounters turbulence, China’s import momentum has remained strong. The substantial 27.8% surge in imports in March is partly the result of domestic policy. Beijing has been implementing measures to stimulate internal demand, encouraging infrastructure investment, consumption and industrial upgrading. At the same time, many Chinese manufacturers are increasing their inventories of raw materials and intermediate goods as a hedge against further disruptions caused by the conflict and potential sanctions-related complications.
This pattern contrasts with the overall picture in 2025, when China’s exports grew by 5.5% for the full year, while imports were broadly flat compared with the previous year. That imbalance pushed the annual trade surplus to a record 1.19 trillion dollars, the highest level on record. The March 2026 data suggests that this configuration may be changing: China could be entering a phase in which the domestic economy plays a larger role in driving growth, while external conditions remain unstable and less predictable.
The pressure on global shipping through the Gulf has also forced companies worldwide to rethink their logistics strategies. Some have tried to reroute cargoes via longer passages, spreading flows across alternative ports and transit corridors. However, such detours add days or weeks to delivery times and increase fuel consumption, exacerbating cost pressures. For time-sensitive goods and just-in-time production models, this creates additional risks of delays and supply shortages.
For China’s export sector, particularly in manufacturing categories such as electronics, machinery, consumer goods and automotive products, increased shipping expenses and delivery uncertainty can make contracts harder to secure. Buyers may delay orders, seek suppliers in regions perceived as less exposed to geopolitical risk, or negotiate lower prices to offset their own rising costs. Smaller exporters, with thinner margins and less bargaining power with shipping companies and insurers, are especially vulnerable.
The situation also raises broader concerns about global inflation and monetary policy. Higher energy and logistics costs are traditionally among the strongest external drivers of price increases. If elevated oil and gas prices persist due to ongoing tensions in the Middle East, central banks in many countries may find it harder to ease monetary policy, even as growth slows and trade weakens. That would further complicate the environment for export-dependent economies, including China.
In response, Beijing is likely to double down on efforts to diversify energy sources and routes. This could mean expanding pipeline imports from neighboring countries, increasing long-term LNG contracts from suppliers outside the Gulf, building up strategic petroleum reserves and accelerating the shift toward renewable energy and electrification. Strengthening overland trade corridors and rail connections could also help reduce dependence on maritime choke points, although such transitions take time and require heavy investment.
At the same time, Chinese policymakers face the challenge of supporting exporters without stoking trade tensions. Measures such as tax rebates, export credits or targeted support to logistics-intensive sectors may be used to cushion the blow from higher transportation costs. However, overtly aggressive export support risks provoking criticism from trading partners that are already wary of China’s growing global market share.
The current episode underscores how economic data can rapidly deteriorate when geopolitical risks materialize. For companies and investors, the March slowdown in Chinese exports serves as a reminder that traditional forecasting models based on demand, interest rates and exchange rates are no longer sufficient on their own. Assessing route-specific risks, insurance conditions and regional security developments is becoming indispensable when planning production, inventory and trade flows.
Looking ahead, much will depend on how long the disruption in the Strait of Hormuz lasts and whether the conflict escalates or is contained. A gradual normalization of shipping, combined with easing energy prices, could allow Chinese exports to regain some of their previous momentum later in the year. Conversely, a protracted confrontation or new rounds of sanctions and military strikes would likely prolong the drag on trade, keeping costs high and volatility elevated.
Beyond trade and energy markets, the article’s original context also referenced domestic legal developments unrelated to the economic story: an ongoing investigation into alleged drug-related offenses involving public figures, with 17 suspects reportedly referred to the courthouse, and a search conducted at a restaurant and entertainment venue in Istanbul’s Beşiktaş district. While these events lie outside the scope of global trade, they illustrate how, in today’s information environment, local security and legal news often shares space with major geopolitical and economic developments, shaping broader perceptions of risk and stability.
In sum, China’s March trade figures reveal a complex picture: a world in which conflict in a geographically distant region can quickly slow the exports of the world’s second-largest economy, drive up costs for producers everywhere and test the resilience of global supply chains. How governments and businesses adapt to this new era of intertwined economic and security challenges will play a decisive role in determining the trajectory of global trade in the years to come.