China Exporters Shift Focus From U.S. Tariffs to Iran War’s Supply Chain Shock Ahead of Trump–Xi Talks

Exporters pivot from tariff anxiety to war risk

Chinese exporters spent the past year racing to reduce reliance on the U.S. market, shifting supply chains overseas and chasing alternative demand centers, including the Middle East, after punishing tariffs disrupted long-standing business models. Now, the Iran war is adding a new layer of strain—constricting key shipping corridors, triggering a historic energy shock, and raising the risk of weaker global demand for Chinese goods.

As U.S. President Donald Trump and Chinese President Xi Jinping prepare to discuss trade and geopolitics later this week, many exporters appear more preoccupied with conflict-driven logistics and cost pressures than with tariff policy. Wang Dan, China director at Eurasia Group, said exporters she has spoken with “all want the war to stop,” adding that many barely raised tariffs when asked what they hoped to see from the summit.

Wang said the immediate concern is the duration of the Iran war, because exporters worry about downstream impacts on overseas orders. Some companies have already drafted contingency plans to downsize in the second half of the year if the conflict drags on.

Strait of Hormuz disruption hits harder than tariff volatility

Economist Intelligence Unit principal economist Yue Su said Beijing and Washington will likely restate their shared interest in reopening the Strait of Hormuz and stabilizing the region. However, Su warned that maritime standoffs and stop-and-go negotiations could persist.

For many exporters, the conflict’s supply chain disruption is proving more damaging than the erratic U.S. tariff swings they managed through much of the past year. Bryan Zheng, founder and CEO of Shenzhen-based cycling helmet maker Livall Tech, said shipping delays through Hormuz have stretched delivery times to about 50 days, compared with a typical 30 to 40 days. To keep goods moving to Europe, Zheng has been forced to rely on costly air freight.

Compounding the issue, port congestion across Asia has pushed freight rates higher. Shanghai and Ningbo are among ports facing significant backlogs, with labor shortages and capacity constraints slowing container flows on Asia–Europe and Mediterranean routes.

Zheng said rail freight—often a faster and cheaper alternative—was not an option after his smart helmets were classified as sensitive dual-use goods, amid active conflict zones along the route.

While a peace deal that reopens Hormuz would be “a huge net positive for everyone,” Zheng cautioned that any ceasefire linked to a Trump–Xi meeting could be temporary. By comparison, he said higher tariffs can be handled by passing costs to consumers.

Energy and input costs surge across China’s industrial base

The impact is not limited to transportation. Rising commodity and energy costs are starting to ripple through Chinese manufacturing. An index measuring input costs for raw materials, fuel, and power in China climbed 3.5% in April from a year earlier, accelerating from 0.8% in March after a multi-year slump.

Cameron Johnson, a Shanghai-based senior partner at supply chain consultancy Tidalwave Solutions, said companies are increasingly worried because the war is “screwing everything up”—from supply chains to raw materials, oil derivatives, and fertilizers sourced from the Middle East. He described it as a global problem “much bigger” than tariffs.

Diversification away from the U.S. accelerates

Last year’s U.S.–China trade war, during which levies briefly surged into triple digits, forced exporters to rethink exposure to a single market. Many expanded production footprints in Southeast Asia, the Middle East, and beyond. The trade truce reached last year did not reverse that shift.

Trade data underscores the rebalancing. China’s exports to the U.S. fell 20% last year, while shipments rose elsewhere: 25.8% to Africa, 13.4% to Southeast Asia, 8.4% to the European Union, and 7.4% to Latin America, according to Wind Information.

Exports to five Gulf nations—Iran, Saudi Arabia, the United Arab Emirates, Qatar, and Kuwait—rose 9% to $144.9 billion, nearly doubling from 2019 levels.

Tariff expectations muted, but uncertainty remains

With many firms now less dependent on U.S. buyers and having already passed higher duty costs downstream, expectations around tariffs heading into the summit are subdued. Su said that regardless of where final tariff rates settle, companies have built workarounds for a more volatile trade environment.

At the same time, Su noted the summit offers Beijing a chance to pursue lower tariffs through concessions, such as increased purchases of American goods.

Legal and policy uncertainty also persists in Washington. After a U.S. court ruling challenged Trump’s authority to impose tariffs, he invoked Section 301—covering unfair trade practices—to keep the threat of duties alive.

Ash Monga, founder and CEO of Guangdong-based IMEX sourcing services, said exporters are no longer betting on a return to pre-tariff conditions. “I don’t see exporters building new factories or dramatically increasing U.S.-focused capacity based on hope alone,” he said. “Now we assume friction is normal.”

Coinasity's Take

The immediate market signal for exporters is clear: geopolitical disruption is now a bigger operational risk than tariff math. With shipping routes constrained and input costs rising, businesses are prioritizing resilience—diversified markets, flexible logistics, and pricing power—over any expectation that U.S.–China trade policy will revert to the old baseline.