SHENZHEN, CHINA – MAY 1: A Chinese flag is raised in front of a stack of shipping containers bearing the brands of MSC (Mediterranean Shipping Company), Maersk and Hamburg Süd at Yantian Port in Shenzhen, Guangdong Province, China on May 1, 2026.
Chen Xin | Getty Images News | Getty Images
Over the past year, Chinese exporters have scrambled to diversify away from the United States, moving supply chains overseas and targeting new markets, including the Middle East, as tough tariffs upend their business models.
Now, the Iran war is putting new pressure on these companies, blocking vital shipping routes, causing a historic energy shock and threatening to reduce global demand for Chinese goods across the board.
As US President Donald Trump and Chinese President Xi Jinping prepare to discuss business and politics later this week, exporters appear to be more concerned about hostilities in the Middle East than tariffs.
“They all want the war to stop,” said Wang Dan, China director at Eurasia Group, who is talking to exporters across the country. When asked about their expectations from the summit, many participants barely mentioned tariffs, he added.
“The focus now is on the Iran war period because we are concerned about orders from overseas markets,” Wang said. Some companies are already making contingency plans to scale back in the second half of the year if the dispute drags on, Wang said.
Yue Su, chief economist for China at the Economist Intelligence Unit, said in the run-up to the summit, China and the United States are likely to reaffirm their shared intention to reopen the Strait of Hormuz and restore stability in the region. However, the standoff at sea and suspension negotiations are likely to be prolonged, Su added.
Supply chain disruptions from the Iran war are hurting exporters more than the volatile U.S. tariffs they’ve been grappling with for much of the past year.
Consider the case of Brian Zheng, founder and CEO of Rivaltech, a Shenzhen-based cycling helmet manufacturer. Sea delays through the Strait of Hormuz extended what would normally be a 30 to 40-day shipment to about 50 days, forcing him to rely on expensive air cargo.
Due to port congestion in various parts of Asia, freight rates are also rising. Shanghai and Ningbo are among the ports experiencing significant backlogs, as labor shortages and transport capacity constraints have slowed the movement of containers on Asia-Europe and Mediterranean trade routes.
Given the presence of conflict zones along the route, Zheng’s smart helmet was classified as a sensitive dual-use item, blocking a faster and cheaper alternative: rail transport.
Zheng said a peace deal that reopened the strait would be “very good for everyone,” but warned that any chance of a ceasefire brought about by the Trump-Xi meeting could be short-lived. In contrast, increasing tariffs can be dealt with by passing costs on to consumers, Zheng said.
The soaring prices of raw materials are beginning to affect the industrial sector as well. China’s index, which measures input costs for raw materials, fuel and electricity, rose 3.5% in April from a year earlier, compared with 0.8% in March, after years of weakness.
“Companies are more concerned about this (war) because it will mess up their supply chains from the Middle East, raw materials, oil derivatives, fertilizers, everything,” said Cameron Johnson, senior partner at supply chain consulting firm Tidal Wave Solutions in Shanghai. “This is a completely global issue, much bigger than tariffs.”
Tariff expectations have slowed
Last year’s trade war between the U.S. and China briefly sent tariffs soaring into triple digits, forcing a rethinking of supply chains and prompting many exporters to expand production in Southeast Asia, the Middle East and elsewhere. A trade ceasefire agreed between the two countries last year did little to ease the shift.
Last year, China’s exports to the United States fell by 20%, but rose significantly elsewhere, with exports to Africa increasing by 25.8%, Southeast Asia by 13.4%, the European Union by 8.4% and Latin America by 7.4%, according to data provider Wind Information.
China’s exports to five Gulf countries, including Iran, Saudi Arabia, the United Arab Emirates, Qatar and Kuwait, rose 9% last year to $144.9 billion, nearly double the 2019 level.
Pre-summit expectations on tariffs have waned for exporters who have become less reliant on the U.S. market and have already passed on the costs of higher tariffs to consumers.
“Regardless of the final tariff level, many companies are integrating workarounds to adapt to a more volatile trade situation,” Su said. But he added that the summit would give Beijing an opportunity to secure lower tariff rates by offering concessions such as increasing purchases of American goods.
A U.S. court ruling challenging President Trump’s authority to impose tariffs has forced him to invoke his Section 301 powers against unfair trade practices to keep the threat of tariffs in place. Therefore, it appears that Chinese exporters no longer expect a return to the pre-tariff era.
“I don’t think exporters will build new factories or dramatically expand their production capacity for the U.S. based on hope alone,” said Ash Monga, founder and CEO of IMEX Sourcing Services in Guangdong province. “We learned the hard way not to rely on one market. We now assume friction is normal.”
