China’s export boom is losing steam, thanks to the Iran war and the global energy crisis

China’s exports grew 2.5% in March from a year ago, significantly slowing from the previous two months as uncertainties rose from the Iran war and its impact on energy prices and global demand.

The March export data released by China’s customs agency Tuesday missed analysts’ estimates and was sharply down from the 21.8% export growth recorded for January and February.

Imports last month surged 27.8%, up from the 19.8% year-on-year increase in the first two months of this year.

Technology-related exports including a jump in shipments of semiconductors from China on the global artificial intelligence boom have powered its robust exports in early 2026, but economists say impacts from the prolonged Iran war could affect overall global demand for Chinese exports this year.

“China’s exports have decelerated as the Iran war starts to affect global demand and supply chains,” said Gary Ng, a senior economist for Asia Pacific at French bank Natixis.

Despite the significant rebound in China’s export growth in January and February, external demand is likely to weaken due to the war’s energy shock, Bank of America economists led by Helen Qiao wrote in a recent research note. The risks will “arise from a persistent global slowdown in overall demand if the conflict lasts longer than currently expected,” they wrote.

But economists, including those from Bank of America, also noted that the energy supply disruptions could further strengthen global demand for China’s renewable energy technologies such as solar cells, wind turbines and electric vehicles, while enduring semiconductor demand on the AI frenzy is expected to help export momentum.

“Despite the energy price shock, exports should stay solid in the coming quarters, thanks to strong demand for semiconductors and green technologies,” wrote Zichun Huang, a China economist at Capital Economics in a note Tuesday.

The late timing of the Lunar New Year, which fell in mid-February, probably also negatively impacted China’s export data last month with some holiday-related disruptions spilling over, Huang added.

U.S. President Donald Trump’s elevated tariffs on Chinese exports and tensions between Washington and Beijing have also been straining China’s shipments to the U.S. over the past months, with China stepping up its exports to other regions including Europe, Southeast Asia and Latin America.

Analysts are also closely watching Trump’s planned visit to Beijing in May to meet with Chinese leader Xi Jinping following a delay due to the Iran war.

China’s exports to the U.S. fell 26.5% year-on-year in March, widening from a 11% drop in January and February, while those to the European Union and Southeast Asia rose 8.6% and 6.9%, respectively.

Chinese leaders have set an annual economic growth target for 2026 of 4.5% to 5%, the lowest since 1991. China met its “around 5%” economic growth target for 2025 on strong exports—with a record high $1.2 trillion trade surplus—and analysts say exports likely will continue to be a key driver for maintaining economic expansion this year as a prolonged property sector slump in China weighed on domestic demand and investments.

Some economists believe China has so far been relatively well-positioned in shielding itself from the impacts from the Iran war, which has sent fuel prices surging and is threatening worsening global inflation. China’s vast oil reserves and diversified energy sources mean it’s less affected by the fallout from the war, including shipping disruptions in the Strait of Hormuz, a key waterway for energy transport, they said.

This story was originally featured on Fortune.com