- War uncertainty rises, but 1Q trade data shows a robust cycle continues.
- AI wave boosts Asia electronics exports: chips, components, data-centre inputs.
- US retail demand remains strong; sustained US spending supports Asia’s exporters.
- China exports surge despite weaker US trade, aided by rest-of-the-world demand.
- Virtually all countries, with the US a notable exception, are reporting surging exports to China.
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Commentary: Asia’s trade with China/US
The gloom emanating from the war in the Middle East is so pervasive that it is easy to miss out on other developments. While war-related uncertainty and rising energy prices are causing downside risks for the global economy, trade-related momentum remains strong. 1Q data, which captures a full month of the conflict, reflects a robust cycle still in place.
The AI-wave is lifting the entire electronics ecosystem. Asia’s exporters are seeing surging demand for a wide range of products that go into data centres, from chips to electrical components. EM Asia’s exports are tracking over 20%+yoy growth, displaying the strongest momentum since the post-pandemic bounce. April data will also likely show energy exporters like Malaysia and Indonesia benefit.
Beyond the AI-wave, overall consumer demand continues to be robust worldwide, with the US playing a major role. US retail sales tracked double-digit growth in 1Q, driven by surging tax refunds and higher fuel prices. As long as US consumers, making up 30% of global consumption, keep spending, Asia’s exporters will prosper.
A country-by-country stock-taking shows the distribution of the gains from the ongoing electronics boom. China’s exports were up 17.8%yoy through March, helping the economy surprise on the upside with a real GDP growth of 5.0% in 1Q. The outperformance looks especially striking given the decline in trade with the US (exports were down 13%yoy through 1Q). This underscores rising demand in the rest of the word, along with a likely element of trans-shipment. China’s exports to the US continue to decline, but still make up for a good 10% of its total exports, as per our estimates.
For the rest of Asia, 1Q exports to the US were particularly strong for Malaysia, South Korea, Thailand, and Vietnam. Singapore’s slowing trend is largely a base effect story; the overall trend remains strong. But even after a degree of adverse base effect is incorporated, India’s numbers are rather soft. The divergence of performance between India and many of its Asian EM peers is troubling, as it shines a light on the former’s marginal position in the regional electronics supply chain.
What about exports to China? Just as India’s exports to the US have corrected, its exports to China have surged. Geopolitical friction notwithstanding, this shows a renewed bout of pragmatism in China-India trade. Like India, just about all countries in our Asia coverage saw 20%+yoy exports growth to China in 1Q26. Demand for electronics products is not a US-centric phenomenon, China is also doubling down on the AI-wave, pushing up demand.
China’s exports decline to the US is not a one-way story. Fuelled by Beijing’s retaliatory measures, US exports to China have seen a sharp decline. Exporters from the EU and Japan, meanwhile, are enjoying far better fortune. A year’s worth of highly disruptive trade war has left the US with a nearly unchanged external position, with both the 2025 current account and trade (goods) deficits in the 3.5-4% of GDP range, typical of the post-pandemic trend. Surging energy exports could pave the way for a smaller trade deficit in 2026, nothing to do with tariffs, of course.
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