China’s March trade surplus fell to a 13-month low of $51.1bn, as exports slowed and imports rose. For 1Q26, the trade surplus totalled $264.3bn.
In US dollar terms, the 1Q26 trade surplus was down -2.5% year on year versus 1Q25. In renminbi terms, it was down -4.8% year on year, which is more relevant for GDP accounting.
Trade Surplus Signals Growth Drag
Imports increased as prices rose, with larger moves in technology-related items. Higher energy prices are expected to lift import values further in coming months.
A larger import bill would reduce the lift from net exports, which could weigh on China’s 1Q26 GDP. ING’s current GDP forecast for 1Q26 is 4.7%, and it is described as at risk if these trends continue.
The outlook also depends on external demand and US trade policy, with no new tariff shocks assumed but not ruled out. The item notes it was produced using an AI tool and reviewed by an editor.
Based on the recent trade data from March, we see a clear shift in China’s economic picture that demands attention. The trade surplus has unexpectedly dropped to its lowest point in 13 months, as exports slowed while imports, particularly for technology, have surged. This squeeze on net exports makes the initial 4.7% GDP growth forecast for the first quarter look optimistic and vulnerable.
This changing trade dynamic points toward potential weakness for the Chinese yuan in the near term. A smaller surplus means fewer US dollars are being converted into yuan, reducing support for the currency which we’ve seen begin to soften towards 7.28 against the dollar. Looking back at 2025’s relative stability, this new data suggests a fundamental reason for renewed pressure on the currency through the second quarter.
Market Positioning Implications
For equity markets, this signals a need for caution, and we should consider defensive positions on broad Chinese indices. The reduced contribution from net exports, a historically reliable growth engine, could weigh on corporate earnings and overall market sentiment. Hedging strategies, such as buying put options on major China-focused ETFs, may be prudent ahead of the official Q1 GDP release.
Conversely, the strength in imports highlights a different opportunity, especially in the commodity space. With Brent crude prices now holding above $95 a barrel, the rising cost of energy imports will inflate China’s import bill further. This sustained demand, alongside a reported 14% year-over-year jump in semiconductor imports last month, signals continued strength for global suppliers of energy and high-tech components.
The wild card remains the risk of new US tariffs, which could derail the positive outlook for external demand. This uncertainty suggests that market volatility is likely to increase in the coming weeks. We believe strategies that benefit from rising volatility could perform well, as the market digests this weaker domestic growth signal against a backdrop of resilient, but politically sensitive, global demand.
