AI demand supports the resilience of China's July exports, but technology decoupling and tariff risks are rising

Overview

JPMorgan believes China's July trade momentum remained resilient after a moderate cooling. Export growth continued to be driven by AI-related demand, with ADP and integrated circuit shipments offsetting the decline in low-end consumer goods; imports edged down after seven consecutive months of expansion, mainly dragged by non-oil commodities, while high-tech imports continued to grow. Meanwhile, US technology restrictions on China are expanding from advanced chips to robotics, power electronics, optical modules, and AI infrastructure, and together with uncertainty over tariff policy, exports face greater headwinds ahead.

Core views

First, total exports fell month-on-month, but trend growth improved, with high-tech products the core pillar. Second, the export structure diverged clearly, with ADP, integrated circuits, and automobiles strong, while textiles, apparel, toys, and other low-end consumer goods weakened. Third, the import decline was concentrated in non-oil commodities; the crude oil import rebound was driven more by low oil prices and a brief recovery in transportation, and its sustainability remains uncertain. Fourth, the 20% alternative tariff cap disclosed by China helps define the boundary of potential escalation, but US Section 301 and industrial overcapacity investigations could still bring additional tariffs. Fifth, the focus of China-US competition is further shifting toward the AI ecosystem, and technology and supply chain decoupling may weaken China's subsequent export momentum.

Analysis framework

The report combines monthly customs trade data and assesses trade momentum from four dimensions: aggregate volume, seasonally adjusted month-on-month change, year-on-year change, and three-month seasonally adjusted annualized trend; it also breaks down the structure by destination, source, and product category. At the same time, it incorporates the legal basis of US tariffs, technology restrictions, and China's countermeasures to conduct event analysis of China-US trade and AI supply chain risks.

Methodology notes

• Macroeconomic data analysisMulti-frequency growth momentum analysis

  Simultaneously observe year-on-year, seasonally adjusted month-on-month, and three-month seasonally adjusted annualized growth rates

  Year-on-year is used to measure annual changes, seasonally adjusted month-on-month is used to identify the latest monthly turning points, and three-month seasonally adjusted annualized growth is used to reduce single-month volatility and assess short-term trends.

• Trade structure analysisDual breakdown by destination and product

  Break down changes in exports and imports by trading partner and product category

  By comparing regions such as the US, EU, and Emerging Market Asia, as well as categories such as high-tech, mechanical and electrical products, consumer goods, automobiles, and commodities, the report identifies the specific sources of trade resilience.

• Policy risk analysisTariff and technology decoupling event framework

  Assess the impact of tariff legal tools, technology restrictions, and countermeasures on trade

  The report tracks US Section 301, AI ecosystem restrictions, and China's countermeasures, and uses these to assess changes in exports, supply chain costs, and policy uncertainty.

• Conditional scenario analysisAssessment of crude oil import sustainability

  Evaluate whether the import rebound can continue based on transportation conditions and price thresholds

  The report believes that a more sustained recovery in crude oil imports may require a continued recovery in transportation through the Strait of Hormuz and oil prices remaining around or below USD 70 per barrel for a longer period.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China exports and macro growth

  Trade data remain an important reflection of external demand resilience, with high-tech exports offsetting some weakness in traditional consumer goods.

  Strengths

  Exports maintained relatively rapid year-on-year growth, trend growth improved moderately, and the trade surplus remained high.

  Weaknesses

  Exports fell month-on-month in July, with most major destinations showing a slowdown.

  Comparison

  Emerging Market Asia is more resilient than the US, EU, Latin America, and Africa.

  Risks

  Tariff escalation, EU-China trade frictions, and global AI supply chain restrictions may drag on subsequent exports.

• AI and high-tech export chain

  AI-related demand is the core pillar of China's export growth, mainly reflected in ADP and integrated circuit shipments.

  Strengths

  High-tech exports grew month-on-month for the ninth consecutive month, with trend growth significantly higher than overall exports.

  Weaknesses

  Growth is highly concentrated, and mobile phone exports have already declined month-on-month.

  Comparison

  Performance is clearly stronger than low-end consumer goods such as textiles, apparel, and toys.

  Risks

  US restrictions may expand from advanced chips to optical modules, robots, model technology, and data center infrastructure.

• Low-end consumer goods exports

  Categories such as textiles, apparel, and toys were among the main sources of the July export pullback.

  Strengths

  Year-on-year growth remained positive.

  Weaknesses

  Down 2.9% seasonally adjusted month-on-month, clearly weaker than high-tech products.

  Comparison

  Shows a clear divergence from ADP, integrated circuits, and automobile exports.

  Risks

  Weakening external demand and tariff costs may continue to suppress shipments.

• China automobile exports

  Automobiles are a relatively strong category within mechanical and electrical product exports.

  Strengths

  Up 1.3% seasonally adjusted month-on-month in July and up 60.4% year-on-year.

  Weaknesses

  The overall export environment is weakening, and automobile growth may also be affected by trade frictions.

  Comparison

  Growth is higher than overall exports and low-end consumer goods exports.

  Risks

  EU-China trade frictions and potential trade barriers may affect subsequent growth.

• Crude oil

  Low oil prices and a brief recovery in transportation through the Strait of Hormuz drove a sharp rebound in China's crude oil import volumes.

  Strengths

  Import volumes rose 23.3% seasonally adjusted month-on-month in July, reversing the sharp declines of the previous three months.

  Weaknesses

  Import volumes were still down 24.3% year-on-year, and China's purchases are highly price sensitive.

  Comparison

  Crude oil imports rebounded, while most major commodities such as natural gas, iron ore, copper, coal, and soybeans weakened month-on-month.

  Risks

  A renewed rise in oil prices or disruptions to transportation through the Strait of Hormuz could make the rebound difficult to sustain.

• Unitree, Huawei, Sungrow, and related Chinese technology supply chains

  The report believes these companies may fall within the scope of US restrictions on robots, inverters, and the broader AI ecosystem.

  Strengths

  Related products are in strategic areas such as robotics, communications, power electronics, and AI infrastructure.

  Weaknesses

  They are relatively sensitive to overseas market access, certification systems, and cross-border supply chains.

  Comparison

  The scope of US restrictions is extending from advanced chips to broader AI hardware and infrastructure.

  Risks

  Import bans, entity lists, sanctions, intellectual property investigations, and certification restrictions may increase operating and supply chain costs.

Key data

• July exportsUSD 397.9 billionUp 23.9% year-on-year and down 2.9% seasonally adjusted month-on-month.
• Export trend growth13.8%Three-month-on-three-month seasonally adjusted annualized growth, indicating a moderate improvement in the short-term trend.
• July importsUSD 285.4 billionUp 27.5% year-on-year and down 1.5% seasonally adjusted month-on-month.
• Import trend growth33.6%Three-month-on-three-month seasonally adjusted annualized growth, with the trend still relatively strong.
• July trade surplusUSD 112.5 billionThe year-to-date surplus reached USD 688.0 billion, compared with USD 681.0 billion in the same period last year.
• High-tech product exportsUp 0.4% seasonally adjusted month-on-monthThe ninth consecutive month of growth, with three-month seasonally adjusted annualized trend growth of 70.7%.
• ADP and integrated circuit exportsUp 4.4% and 0.9% seasonally adjusted month-on-month, respectivelyThe two product categories offset the impact of a 1.7% seasonally adjusted month-on-month decline in mobile phone exports.
• Automobile exportsUp 1.3% seasonally adjusted month-on-monthYear-on-year growth reached 60.4%.
• Crude oil import volumeUp 23.3% seasonally adjusted month-on-monthStill down 24.3% year-on-year, with the rebound mainly related to lower oil prices and a brief recovery in transportation.
• High-tech product importsUp 4.5% seasonally adjusted month-on-monthGrowth may still include price effects, while import volumes of memory chips and modules have turned negative year-on-year.
• Exports to Emerging Market AsiaUp 0.3% seasonally adjusted month-on-monthThe fourth consecutive month of growth, with exports to South Korea up 6.2%.
• Alternative tariff cap20%China's Ministry of Commerce disclosed that the US committed in bilateral negotiations to set this cap on Chinese goods.

Impact & implications

In the short term, AI-related demand, high-tech products, and automobiles can still support China's exports, and the trade surplus remains elevated. Over the medium term, export growth is increasingly dependent on a small number of high-tech categories, while exports to most destinations have already slowed month-on-month; if the US further restricts robots, inverters, optical modules, and AI companies, China's high-tech exports and related supply chains may come under pressure. The rebound in crude oil imports can temporarily support total imports, but given China's high price sensitivity, its sustainability still depends on oil prices and transportation conditions.

Risks

• US technology restrictions on China are expanding from advanced chips to robots, inverters, optical modules, and AI infrastructure.
• US Section 301 and industrial overcapacity investigations may become tools for additional tariffs and negotiating pressure.
• Although the 20% alternative tariff cap helps stabilize expectations, broader US tariff arrangements remain uncertain.
• EU-China trade frictions may create additional pressure on automobiles and other export categories.
• Most major export destinations weakened month-on-month, and export growth is becoming more concentrated in AI-related categories.
• Growth in high-tech imports may partly come from price effects, and physical import volumes may not be equally strong.
• The rebound in crude oil imports depends on low oil prices and restored transportation, and its sustainability is limited.
• Mutual China-US export controls, entity lists, and certification restrictions may increase supply chain frictions and costs.

What to watch

• Whether exports of ADP, integrated circuits, mobile phones, and high-tech products can continue growing.
• Subsequent implementation of US Section 301 industrial overcapacity investigations and the alternative tariff cap.
• New US restrictions targeting Chinese robots, inverters, optical modules, and AI companies.
• Further changes in China's export controls on drones and dual-use technologies, entity lists, and certification measures.
• Whether export divergence among the US, EU, and Emerging Market Asia widens.
• Whether the price and volume contributions to high-tech imports diverge.
• Transportation conditions in the Strait of Hormuz and whether oil prices can remain around or below USD 70 per barrel over the long term.
• Performance of low-end consumer goods and automobile exports in an environment of rising trade barriers.