AI demand keeps China exports running despite fresh US tariffs

Part of the export strength also reflected Chinese manufacturers racing goods onto US-bound vessels ahead of an anticipated tariff increase. Washington applied a new levy of around 12.5% on Chinese products in late July, replacing a temporary lower rate that had expired. Beijing's trade surplus, which topped $1 trillion for the full year in 2025, remains a persistent point of friction with major trading partners including the United States and the European Union, both of which have pressed China to rebalance its economy toward domestic consumption.

The data landed just as Beijing and Washington exchanged a fresh round of retaliatory measures. In response to recent US technology restrictions and forced-labor blacklists, China this week restricted exports of drones as part of a broader package of countermeasures. Even so, Beijing has signalled it wants to avoid a full breakdown in bilateral relations, with the base case among analysts still pointing to a state visit proceeding largely as planned, albeit with several potential complications still unresolved.

The stronger than expected export print, even as growth cooled from June's pace, suggests China's manufacturing base is still finding external demand to lean on despite a soft domestic consumption backdrop and the weakest quarterly GDP growth since late 2022. Chinese authorities reaffirmed support for the slowing economy at a policy-setting meeting in late July, pointing to accelerated fiscal spending and timely monetary adjustments, though they stopped short of announcing concrete new steps to lift household spending. Second-quarter GDP growth slowed to around 4.3%, its weakest pace since the fourth quarter of 2022.

Continued strength in AI-linked exports supports the broader narrative of resilient tech demand propping up regional growth, a theme relevant to Asian equities and currencies exposed to the AI supply chain, including South Korea's chip exporters. Renewed US-China friction is a modest headwind for risk sentiment and could weigh on commodity currencies such as the Australian dollar if it escalates further.