Tariffs Changes and their impact on Air Cargo Capacity

Global trade is constantly shifting, and tariffs changes play a pivotal role in shaping these dynamics. You may have noticed how increased tariffs on imports disrupt supply chains and alter air cargo demand. For instance:

• Air cargo demand grew by 5.8% year-on-year in April, reflecting seasonal trends and evolving trade policies.

• A steep 125% tariff on Chinese imports in early 2025 caused significant supply chain disruptions, forcing businesses to rethink their strategies.

• Supply chain shifts to Southeast Asia still struggle to recover from a 30-60% volume loss due to tariff impacts.

These changes ripple across industries, affecting trade volumes and pushing businesses to adapt quickly. For air cargo, this means rethinking capacity allocation, exploring new trade routes, and leveraging innovative logistics solutions to stay ahead of the curve.

Key Takeaways

• Tariff changes affect air cargo demand. Businesses must change shipping plans to save money.

• Online shopping depends on the de minimis rule. Removing it may raise costs and make air shipping harder.

• Companies can handle tariff problems by using different suppliers. They can also look for new markets to avoid high-tariff areas.

• Air carriers are changing routes and freight prices. This helps them use space better and follow new trade trends.

• Shippers and carriers must work together. This helps manage demand changes and makes supply chains work better.

Immediate Effects of Tariffs Changes on Air Cargo

Impact on air freight demand

Tariffs changes have a direct and immediate impact on air freight demand. When new tariffs are introduced, businesses often adjust their shipping strategies to minimize costs. For example, in 2018, the introduction of tariffs caused air cargo demand growth to slow significantly, dropping from 9.0% in 2017 to just 3.5% in 2018. By 2019, demand had declined further by 3.9%. This trend highlights how sensitive air freight demand is to trade policy shifts.

In 2025, the scope of tariffs expanded, creating even greater challenges for the air cargo sector. Cargo airlines had to adapt quickly by modifying their network planning and capacity deployment strategies. These adjustments became necessary as global air cargo demand showed only a 2% year-on-year increase in January 2025, a sharp contrast to the double-digit growth seen in previous years. The timing of the Lunar New Year also played a role, reducing shipping volumes from China.

E-commerce shipments, which rely heavily on air freight, have been particularly affected. The inclusion of the "de minimis" provision in the 2025 tariffs has disrupted small parcel delivery services. Transport prices on certain trade routes have risen, and businesses have started placing early orders to avoid higher tariffs. This behavior contributed to a 4.4% year-on-year increase in global air freight traffic in March, with cargo volumes reaching 23 billion tonne-kilometers.

Disruptions in supply chains and trade routes

Tariffs changes often force businesses to rethink their supply chains, leading to significant disruptions. Higher tariffs increase acquisition costs for companies that rely on imports. As a result, many businesses diversify their supplier networks to avoid these costs. However, this process can be time-consuming and expensive. For instance, some manufacturers have relocated production closer to demand centers to reduce exposure to cross-border duties.

These shifts in sourcing strategies have also led to congestion at ports and changes in transportation modes. Shipping costs have increased as companies reroute global supply chains to minimize tariff exposure. A German auto parts supplier, for example, altered its shipping route to pass through Mexico, saving on duties. Similarly, some businesses engage in "tariff engineering," modifying product specifications to fit into lower-duty classifications. A bicycle manufacturer added a rear reflector and bell to its products to reduce duty rates.

Labor disruptions are another consequence of these changes. Industries facing higher costs may resort to layoffs or reduced hiring to stay competitive. These challenges highlight the ripple effects of tariffs changes on supply chains and trade routes. The long-term impact of these adjustments often stabilizes within two years, as noted in a report by the Congressional Budget Office (CBO).

To illustrate the broader impact, here is a table summarizing key metrics influenced by recent tariffs:

These figures demonstrate how tariffs changes reshape air cargo operations, from capacity adjustments to shifts in trade routes.

Trade Volumes and Industry-Specific Impacts

Decline in trade volumes for tariff-affected goods

Tariffs changes often lead to a noticeable decline in trade volumes for affected goods. When tariffs increase, the cost of importing goods rises, making them less attractive to buyers. You might have seen this happen in industries like aerospace and e-commerce, where higher tariffs on raw materials and finished products disrupt supply chains. For instance, tariffs on steel and aluminum have added up to $5 billion annually to production costs in the U.S. aerospace sector. This has reduced trade volumes and altered air cargo flows, creating delays and shifting trade corridors.

The impact on air cargo demand is equally significant. As trade volumes drop, carriers face reduced bookings and must redeploy capacity to alternative routes. A recent analysis showed that global air cargo capacity rose by 4% year-on-year, but spot rates per kilogram increased by 10%, reaching $2.53. These changes reflect the challenges carriers face in balancing supply and demand amidst fluctuating trade volumes.

Key industries impacted by tariff changes

Certain industries feel the effects of tariffs changes more acutely than others. You can observe this in sectors like aerospace, airlines, and e-commerce, where tariffs reshape operational dynamics. Here’s a breakdown of how these industries are impacted:

E-commerce, in particular, has seen a sharp decline in airfreight volumes due to shifting production locations. The removal of the de minimis exemption for imports from China and Hong Kong has further complicated small parcel shipments. This has forced businesses to explore alternative sourcing strategies, increasing reliance on air cargo for time-sensitive goods.

Regional trade shifts and their implications

Tariffs changes also drive regional trade shifts, altering air cargo operations globally. You might notice how trade routes adapt to new economic realities. For example, capacity on the Asia-Europe route dropped by 33%, causing major disruptions in shipping and air cargo demand. Similarly, trade between Asia and West Africa fell in priority, with the route dropping from the sixth to the eleventh most active. These shifts highlight the need for carriers to redeploy resources strategically.

Domestic air freight in regions like Japan and South Korea has grown strongly, reflecting increased regional demand. In contrast, transpacific hubs like Chicago O’Hare and Anchorage handle over 25,000 tons of cargo weekly, underscoring their importance in global logistics. These changes emphasize the need for agility in air cargo operations to adapt to evolving trade patterns.

Regional policies also play a role in shaping trade dynamics. Countries like India and the U.S. have implemented tariff quotas to protect domestic industries while managing trade imbalances. For instance:

1. European Union and Dairy Products: The EU uses tariff quotas to protect local farmers while maintaining access to international markets.

2. U.S. Agricultural Policies: The U.S. employs tariff quotas for agricultural commodities to safeguard its domestic sector.

3. Emerging Economies – A Case from India: India applies tariff quotas in sugar and textiles to shield local producers from price fluctuations.

These examples illustrate how governments use tariffs to influence trade volumes and air cargo demand, creating ripple effects across industries and regions.

De Minimis Exemption Changes and Air Freight

Overview of de minimis exemption and its significance

The de minimis exemption plays a vital role in air freight, especially for e-commerce. It allows low-value shipments, typically under $800, to enter the U.S. duty-free. This exemption simplifies customs procedures and reduces costs for businesses. For e-commerce companies, it has been a game-changer, enabling direct-to-consumer shipments from countries like China.

If the de minimis exemptions are removed for e-commerce goods from tariff-impacted countries, it could lead to increased costs and complexities in customs procedures, which would significantly affect air freight operations.

This exemption has driven significant air freight demand by making it easier for consumers to receive low-value goods quickly. However, recent changes to this policy, particularly for imports from China, have raised concerns about its impact on air cargo demand and operational efficiency.

Effects of de minimis threshold changes on air cargo

Changes to the de minimis threshold have created challenges for the air freight industry. The suspension of this exemption for Chinese imports has led to higher tariffs and increased compliance requirements. These changes have disrupted the flow of small parcel shipments, which rely heavily on air freight.

1. The de minimis exemption facilitates e-commerce by reducing customs procedures, making it easier for consumers to receive low-value goods.

2. The suspension of this exemption for Chinese imports could lead to a decrease in e-commerce volumes, affecting air freight demand.

3. The air freight industry is concerned about the potential increase in costs and delays due to the removal of the exemption, which could impact operational efficiency.

Carriers now face the challenge of balancing capacity with reduced demand for small parcel shipments. This has prompted some businesses to explore alternative sourcing strategies to mitigate the impact.

Implications for e-commerce and small parcel shipments

The removal of the de minimis exemption has significantly impacted e-commerce and small parcel shipments. Companies like Shein and Temu, which relied on low-cost direct shipping to U.S. consumers, now face higher tariffs and compliance costs.

"Shippers who built their business models around direct-to-consumer fulfillment from Asia are going to be hit hard... This unpredictability is creating chaos across global supply chains." - Brandon Fried, Executive Director at the Airforwarders Association.

These changes have forced businesses to rethink their logistics strategies. Many are now shifting production closer to demand centers or exploring local fulfillment options to reduce costs and maintain efficiency.

Carrier Strategies in Response to Tariffs Changes

Route redeployments to optimize capacity

Carriers are adapting to shifting trade patterns by redeploying routes to optimize air cargo capacity. You might notice that capacity is being redirected from traditional trade lanes, such as China-to-U.S., to emerging markets like Southeast Asia, India, and Europe. This strategic shift ensures that carriers can maintain efficiency despite declining volumes on tariff-affected routes.

To further enhance route optimization, carriers are employing advanced tools and strategies. For example:

These measures allow carriers to remain agile and responsive to market changes, ensuring that your shipments reach their destinations efficiently.

Adjustments in air freight rates and surcharges

Tariff-related disruptions often lead to fluctuations in air freight rates and surcharges. Carriers are responding by adopting dynamic pricing models that adjust based on real-time market conditions. This approach helps balance supply and demand while offering you more predictable cost structures.

For instance, some carriers now factor performance metrics into rate adjustments. Reliable carriers receive higher volume commitments, which helps stabilize pricing. Additionally, weight break pricing is being used to provide more accurate cost comparisons for shippers.

Tip: To manage costs effectively, consider leveraging tools that allow real-time rate comparisons. These tools enable you to benchmark freight rates and make quick, informed decisions.

Collaboration with shippers to manage demand fluctuations

Collaboration between carriers and shippers has become essential for navigating demand fluctuations. By sharing forecasts and aligning expectations, you can reduce lead times and improve supply chain efficiency. Many carriers now offer flexible terms that allow for adjustments based on changing circumstances.

Here are some collaborative strategies you can adopt:

• Build strong relationships with multiple carriers to enhance negotiation power.

• Use transportation management systems (TMS) to benchmark rates and optimize shipping decisions.

• Share data and performance metrics with carriers to align goals and improve service levels.

Long-term partnerships also play a crucial role. By establishing trust and transparency, you can secure better capacity commitments and mitigate risks during periods of uncertainty.

Note: Strengthening relationships with logistics providers and freight forwarders can give you access to broader networks and more reliable service options.

Shipper Strategies to Navigate Tariffs Changes

Tariff shopping and sourcing from alternative markets

You can navigate tariff challenges by exploring alternative markets and suppliers. Diversifying your sourcing strategies reduces dependency on regions impacted by high tariffs. For example, developing suppliers in countries with preferential tariff treatment, such as Vietnam or Mexico, can help you lower costs and mitigate risks. This approach also ensures supply chain resilience during economic uncertainties.

Another effective tactic is tariff engineering. By modifying products or processes, you can classify goods under lower tariff categories. For instance, adding specific components to your products may qualify them for reduced duties. Leveraging rebate programs like the U.S. Duty Drawback Program can also help you recover tariffs on goods that are re-exported, saving you money in the long run.

Shifts in production and supply chain strategies

Shifting production closer to demand centers is another way to adapt to changing tariffs. Many manufacturers are relocating operations to countries with lower tariff rates or nearshoring production to reduce transportation costs. For example, a leisure equipment manufacturer redirected goods from China to Europe and Australia while sending products from Vietnam to the U.S. This strategy minimizes tariff exposure and optimizes freight lanes.

You can also benefit from real-time data to make informed decisions. Static reports often fail to capture the rapid changes in tariff landscapes. High-frequency data provides better visibility, allowing you to adjust sourcing and distribution patterns effectively. Companies leveraging this data gain a competitive edge by rerouting cargo and optimizing inland distribution.

• Importing higher freight volumes as a precaution against tariffs can stabilize your supply chain.

• Shifting cargo from China to alternative locations like Vietnam or Mexico reduces tariff-related risks.

• Using cheaper transportation modes like ocean container and rail intermodal can lower costs compared to air cargo or truckload options.

Increased reliance on air freight for time-sensitive goods

When time-sensitive shipments become critical, air freight offers a reliable solution. Rising tariffs on other transport modes have increased demand for air cargo, especially for high-value goods. In 2024, air freight volumes grew significantly due to disruptions in ocean shipping and the need for urgent deliveries. Major logistics companies recalculated route economics for Asia-U.S. lanes, ensuring efficient operations despite economic pressures.

The projected growth rate for air freight in 2024 is 11.3%, highlighting its importance for urgent shipments. Smaller logistics providers face margin pressure, leading to delays in bookings. However, larger carriers are adapting by optimizing capacity and improving service reliability. You can benefit from this shift by prioritizing air freight for critical goods, ensuring timely delivery and maintaining customer satisfaction.

Tip: To maximize efficiency, collaborate with logistics providers who specialize in air freight. Their expertise can help you navigate tariff-related challenges and streamline your operations.

Tariffs changes are reshaping the air cargo industry, requiring you to adopt agile strategies to stay competitive. Companies are embracing flexible supply chains, on-demand manufacturing, and stronger collaboration with partners to navigate these challenges. The growing demand for air freight, driven by e-commerce and supply chain disruptions, highlights the need for strategic planning. Investments in logistics infrastructure and adaptive policies further emphasize the importance of preparing for evolving market conditions. By staying proactive, you can mitigate risks and seize opportunities in this dynamic landscape.

FAQ

What are tariffs, and how do they affect air cargo?

Tariffs are taxes on imported goods. They increase costs for businesses, which reduces trade volumes. This impacts air cargo by lowering demand for freight services and forcing carriers to adjust routes and capacity.

How can you adapt your supply chain to tariff changes?

You can diversify suppliers, relocate production closer to demand centers, or use tariff engineering to reduce costs. These strategies help you maintain efficiency and minimize risks from fluctuating trade policies.

Why is the de minimis exemption important for air freight?

The de minimis exemption allows low-value goods to enter duty-free, simplifying customs and reducing costs. Its removal increases compliance requirements, which disrupts e-commerce shipments and raises air freight costs.

What industries are most affected by tariff changes?

Industries like aerospace, e-commerce, and manufacturing face higher costs and disrupted supply chains. These challenges reduce trade volumes and increase reliance on air cargo for urgent shipments.

How do carriers respond to tariff-related disruptions?

Carriers redeploy routes, adjust freight rates, and collaborate with shippers to manage demand fluctuations. These strategies ensure efficient operations despite changing trade patterns and economic pressures.

See Also

Understanding Current Trends in Logistics Risk Management

Exploring How Global Trade Policies Affect National Economies

Discovering Innovations in Sea Freight Logistics for 2024

Analyzing Inflation's Effects on Supply Chain Challenges

A Detailed Look at the Future of LTL Freight