MNI INTERVIEW: Geopolitics Add To China Export Uncertainty

China’s export growth is likely to slow from the first quarter’s rapid pace, due to baseline effects and the impact on on global demand of the conflict in the Persian Gulf, a policy advisor to the Ministry of Commerce told MNI, adding that U.S. tariff hikes remain a risk.

“It will be increasingly difficult for exports and imports to continue growing in the double digits, and even single-digit growth would be a strong performance considering the elevated baseline, with the country's annual goods trade volume already exceeding USD6 trillion, coupled with geopolitical conflicts and fluctuations in external demand,” said Zhang Jianping, deputy director of the Academic Committee at the MOFCOM-affiliated Chinese Academy of International Trade and Economic Cooperation, after exports grew 14.7% year-on-year in Q1, as imports jumped 22.7%.

Net exports contributed over 30% to China’s economic growth last year, but this is set to fall given the uncertain outlook and repeated external shocks, Zhang said, adding that the economy needs to rely on domestic demand for 80-90% of its expansion.

A prime driving factor of Q1’s growth remained front-loading of shipments ahead of possible U.S. tariff hikes, said Zhang, noting how Washington has turned to Section 122 and Section 301 rules to investigate Chinese imports since February’s Supreme Court ruling against the previous “reciprocal” and “fentanyl-related” levies.

“It is hard to predict how much the tariffs will be increased, as it will be announced based on the findings of the investigation which has relatively complex procedure,” Zhang added. The U.S. launched two major Section 301 investigations in March, targeting manufacturing overcapacity in 16 economies and failures to take action on forced labour in 60 economies.

China has retaliated with counter-probes into U.S. ‌practices that "disrupt global supply and industrial ​chains" and "hinder trade in green products," as well as reiterating its call for the complete removal of unilateral additional tariffs during the last round of negotiations with the U.S. in France last month. 

“The great uncertainty of the Trump administration makes it hard to predict their tariff policy and prices,” said Zhang, adding that the summit set for mid-May between Donald Trump and Xi Jinping could reduce uncertainty to some degree.

Increasing imports should mean that China’s trade in goods will become more balanced this year, supported by the moderate appreciation of yuan and government efforts to encourage overseas purchases, he said. (See MNI INTERVIEW: China 2026 Export Growth To Support Yuan)

EXPORT RESILIENCE

While the current extent of yuan strength is unlikely to have much effect on exports, the outlook for external demand is more uncertain, Zhang said, adding that orders from the Middle East and neighbouring regions such as West Asia and North Africa are most at risk due to logistical disruption. 

Exports of consumer goods to the Middle East may be significantly affected, though capital goods and high-value-added, high-tech products tend to be less vulnerable to short-term shocks due to their longer order cycle, he said.

China has moved up on the value chain in recent years, with electromechanical products accounting for over 60% of exports. The country’s diversified industrial base is also well positioned to cope with supply chain disruptions and to meet rising demand for new energy products. Exports of electric vehicles, lithium batteries and wind turbine generators grew 77.5%, 50.4% and 45.2% y/y respectively in Q1, noted Zhang.

The share of China’s foreign trade with the “Global South” including Belt and Road countries is on a mid-to-long-term upward trend, but it is necessary to maintain at least single-digit growth with developed markets such as the EU, said Zhang, noting that the 21.1% y/y growth in Q1 shipments to the bloc was also supported by front loading.