A China Cargo Airlines 777 freighter at LAX: E-commerce tariffs could significantly impact air cargo demand.
President Trump’s abrupt decision to revoke duty-free privileges for low-value e-commerce imports from China, Mexico, and Canada has sent tremors through the international trade landscape. While numerous sectors are grappling with the implications, the air cargo industry and Chinese online retailers appear poised to bear the brunt of this policy shift.
In 2024, the U.S. received over 2.5 million tons of air cargo from China, with approximately 1.3 million tons comprising low-value e-commerce goods now subject to the new regulations. This sudden change, effective immediately, has left businesses scrambling to decipher the intricacies of the new rules and adapt their operational strategies accordingly. The lack of clear guidance from U.S. Customs and Border Protection (CBP), coupled with the White House’s vague announcement, has further exacerbated the confusion. While Canada and Mexico received a temporary reprieve from certain tariffs, the core issue of duty-free exemptions for e-commerce remains.
Chart showing the growth of de minimis shipments from China.
This decision stands in stark contrast to the Biden administration’s earlier approach, which involved a standard 60-day comment period and a phased implementation. President Trump, invoking emergency economic powers, opted for an immediate and comprehensive ban, citing concerns about fentanyl smuggling. This abrupt shift has amplified the impact on businesses accustomed to the previous $800 de minimis threshold, which exempted goods below that value from duties and taxes.
Chinese online retail giants like Shein and Temu, heavily reliant on the de minimis provision for direct-to-consumer shipping, face significant challenges. Their business model, predicated on airfreight for rapid delivery, fueled remarkable growth in the air cargo sector in recent years. This surge pushed air cargo rates to unprecedented highs, providing a lifeline to the industry. E-commerce now represents a substantial portion of airfreight volume, particularly from Asia.
The immediate impact of these tariffs is a likely shift towards bulk shipping via ocean freight, sacrificing speed for cost savings. This transition could significantly reduce air cargo demand, potentially leading to a drastic decline in transpacific air cargo rates. The ripple effect could extend beyond this specific trade lane, impacting global air cargo prices as freed-up capacity becomes available.
Chart illustrating the potential impact of the de minimis ban on air cargo rates.
While the Lunar New Year celebrations in China may provide a temporary buffer, the long-term consequences could be substantial. Experts predict potential rate drops of up to 30%, with even steeper declines possible given the current record-high air capacity. The extent of the impact hinges on the degree to which e-commerce shifts away from airfreight and the overall market response to the new regulations.
The situation is further complicated by the closure of a Mexican bypass option. New regulations in Mexico, imposing tariffs on raw materials and parts for apparel manufacturers, have eliminated the possibility of circumventing the tariffs by routing Chinese goods through Mexico. This development underscores the comprehensive nature of the policy changes and the limited options available to businesses.
While the long-term consequences remain uncertain, the immediate impact on the air cargo industry and Chinese e-commerce is undeniable. The sudden shift away from duty-free privileges for low-value shipments has triggered a wave of uncertainty and operational adjustments. As businesses adapt to the new reality, the air cargo sector faces a period of significant flux, with potentially far-reaching consequences for global trade.
