China exports are getting costlier — and the oil shock, AI boom are partly to blame – Firstpost

Rising energy prices and a global scramble for artificial intelligence infrastructure pushed China’s export prices sharply higher in April, raising the prospect of renewed inflationary pressures across global supply chains.

Data released by China’s General Administration of Customs showed the country’s export prices rose 5 per cent year-on-year in April, ending a prolonged period of declines and marking the strongest increase since April 2023.

The sharp rise was driven by a global oil shock that lifted manufacturing costs, alongside an AI-driven surge in semiconductor demand that sent chip prices soaring — signalling a potential new phase of export inflation from the world’s largest manufacturing hub.

AI boom powers global trade rebound

The increase comes amid a broader rebound in global trade, fuelled largely by rapid expansion in AI-related infrastructure investment.

According to figures released on Friday by the Netherlands Bureau for Economic Policy Analysis (CPB), the volume of goods traded globally rose 3.5 per cent in the first quarter of 2026 from the previous three months, extending a stronger-than-expected recovery that began in 2025 despite higher US tariffs.

A major driver of that growth has been surging demand linked to data centres and AI infrastructure, particularly in the United States.

A recent United Nations report said the AI boom has sharply increased trade in products such as servers, high-performance computing equipment, semiconductors and automation-related components — many of which are manufactured in Asia.

China has emerged as one of the biggest beneficiaries of the AI-led trade surge. According to the CPB, Chinese exports rose 11.3 per cent in the first quarter from the previous quarter, while exports from advanced Asian economies excluding Japan climbed 10.1 per cent. Japanese exports rose 3 per cent.

The counterpart to Asia’s export surge was a 6.3 per cent jump in US imports, underscoring how American technology investment is reshaping global trade flows.

The AI investment boom has also intensified pressure on semiconductor supply chains, sending chip prices sharply higher. Chinese exports of electronics and electrical machinery rose more than 20 per cent in price in April, customs data showed.

At the same time, AI-related demand has fuelled rallies in industrial metals such as copper, which recently touched record highs in global markets. Rising copper costs lifted export prices for Chinese copper products and other metal-intensive goods.

Among the biggest contributors to the overall increase were mineral fuel exports — including petroleum oil — whose prices rose 22 per cent from a year earlier in April. Fertiliser prices, heavily dependent on natural gas, increased 17 per cent.

End of China’s ‘exported deflation’ era?

For much of the past three years, China acted as a major source of cheap manufactured goods, helping contain inflation globally as weak domestic demand and intense competition among factories kept prices low.

A sustained reversal of that trend could complicate inflation outlooks in advanced economies, especially the United States, where importers have relied heavily on low-cost Chinese goods.

However, the gains in export prices were uneven across sectors. Many products continued to record falling prices, particularly finished goods such as rubber and plastic products, as well as textiles and apparel.

The divergence reflects persistent overcapacity and fierce competition in traditional manufacturing industries, limiting factories’ ability to fully pass on higher raw material costs to buyers.

That dynamic could squeeze profit margins for downstream manufacturers, potentially putting pressure on wages and further weakening consumer spending within China’s already fragile domestic economy.

West Asia conflict clouds outlook

While AI-related trade remains robust, economists warn that broader global trade momentum could weaken in the coming quarters as the conflict in West Asia disrupts shipping and raises energy prices.

The ongoing disruption around the Strait of Hormuz — one of the world’s most critical energy transit chokepoints — has already begun affecting maritime trade and logistics costs.

“The disruptions in the Strait of Hormuz have induced a significant negative shock to trade and maritime transport in particular,” the United Nations said this week.

According to the UN, global trade growth is expected to slow to between 1.5 per cent and 2.5 per cent this year, down from 4.7 per cent in 2025, although forecasts remain highly uncertain.

The World Trade Organization estimates global trade could still expand by 3 per cent if AI-related demand proves stronger than expected, partially offsetting the drag from geopolitical disruptions and higher energy prices.

Outside the AI-driven trade cycle, many regions are already showing signs of weakness. The eurozone recorded a 1.2 per cent decline in exports in the first quarter, while Latin America saw growth of just 0.6 per cent. Exports from Africa and West Asia fell 8.2 per cent from the previous quarter as the regional conflict disrupted shipping routes and business activity.

The latest data suggest the global economy may be entering a new phase in which AI investment and geopolitical conflict together are reshaping trade flows, supply chains and inflation dynamics — potentially ending an era in which China primarily exported deflation to the rest of the world.