-
Air cargo now faces an uncertain future after more than a year of double-digit growth
-
US President Donald Trump’s recent ‘Liberation Day’ global tariffs announcement has the potential for sparking an international trade war
-
The general cargo market is now reevaluating its future as shippers, forwarders, airlines, and consumers come to terms with the economic reality of new import taxes
Air cargo now faces an uncertain future after more than a year of double-digit growth, according to Xeneta’s Chief Airfreight Officer Niall van de Wouw.
“In my 30 years working in the air freight industry, I cannot remember any other unilateral trade policy decision with the potential to have such a profound impact on the market at a global level,” he said in a statement.
Blame falls squarely on the lap of US President Donald Trump, whose recent ‘Liberation Day’ global tariffs announcement has the potential for sparking an international trade war.
Among others, e-commerce volumes – long the savior of global air cargo demand – are now facing up to the ‘seismic shock’ of the imposition of global import taxes on goods into the United States starting April 9, 2025.
The general cargo market is now reevaluating its future as shippers, forwarders, airlines, and consumers come to terms with the economic reality of new import taxes.
Trump confirmed the elimination of duty–free de minimis treatment for low-value imports from China and Hong Kong, starting May 2, 2025.
This means that all relevant postal items valued at or under $800 previously qualifying for the de minimis exemption will become subject to a duty rate of either 30% of their value or $25 per item (rising to $50 per item after June 1, this year).
Global air cargo demand is seen to suffer further harm from retaliatory actions by other countries. EU President Ursula von der Leyen, called the US decision “a major blow for the world economy.”
In recent years, cross-border e-commerce has evolved as the major driver for global air cargo demand growth. China-to-US e-commerce shipments alone account for roughly half of the cargo capacity on this eastbound corridor and around 6% of global air freight demand.
A disruption to this demand will free up a significant part of the corridor’s cargo capacity and spread its impact to the rest of the market, said van de Wouw.
New air cargo market data for March indicated shippers and forwarders were ‘hedging their bets’ and buying time before making longer-term commitments to air cargo capacity as they waited to see how the impact of newly-imposed tariffs and international trade tensions unfold.
March showed no drastic signs of panic as demand rose +5% year-on-year against a strong comparison 12 months ago.
Given the tumultuous market uncertainties, the latest air cargo market data reflected the cautious wait-and-see approach being adopted by industry stakeholders.
Shippers negotiating contracts in the first quarter of this year preferred shorter-term agreements of three months or less, representing 79% of contracts – an increase of nearly 20 percentage points year-on-year.
Meanwhile, freight forwarders continue to place approximately 45% of their volumes in the spot market.
“With the growth of rates slowing overall, we’d normally expect to see shippers making longer capacity commitments to achieve more competitive rates, but right now, this is clearly a gamble few shippers are ready to take – and this is before we’re even seeing tariffs impacting volumes,” said van de Wouw.
It’s a ‘big ask’ for a freight forwarder to commit to a fixed rate for a year, even with various ‘escape clauses’ in place, van de Wouw said, adding, “In this environment, the T&Cs are becoming just as important as the air freight rate.”.
March saw a third consecutive month of tempered single-digit global air cargo demand growth, although not as subdued as some might have expected. The temporary suspension of the de minimis ban by the US on inbound Chinese shipments produced a recovery in transpacific e-commerce demand.
The impact on e-commerce volumes carried by air into the US will not only mean higher prices for consumers, it also raises the prospect of increased border congestion given the sudden and dramatic increase in shipments needing to be processed by US Customs and Border protection.
Global air cargo supply grew +2% year-on-year in March, but still at a slower pace than global air cargo demand growth. With a combination of supply/demand rebalancing, the dynamic load factor stayed on par with last year at 60%. Dynamic load factor is Xeneta’s measurement of capacity utilization based on volume and weight of cargo flown alongside available capacity.
The addition of summer capacity from the end of March to satisfy peak passenger travel demand could see one of two scenarios unfolding in the current climate, van de Wouw said.
“There appears to be a fundamental shift in sentiment emerging in the consumer market in response to the potential chaos and added costs of tariffs being imposed on and by countries and trading blocs,” he said. “What happens if there is less passenger demand across the Atlantic this summer? Less passengers means less bags, which produces even more cargo capacity in the market. If passenger and cargo volumes feel an impact, the next step might be for airlines to downgrade or divert capacity.”
Van de Wouw says market anxiety and uncertainty is not good for anyone: producers, consumers, airlines, or forwarders.
“It’s a crazy environment, left and right,” he said.
“No one is benefitting from this situation because it’s impossible to plan effectively against a moving target. Clearly, everyone will be waiting to see how the removal of the de minimis threshold and all the global tariffs already announced and those still to come will impact trade, as well as how quickly there will be less demand and, consequently, less airfreight. It’s all expectations right now, but we must expect the situation will get worse before it gets better.
