The prospects for global trade are darkening. Larry Fink, the CEO of Black Rock, commented in a recent letter to investors that he found “nearly every client, nearly every leader – nearly every person” he talked to was “more anxious about the economy than at any time in recent memory”.
If this is true then areas of the logistics economy should be reflecting such pessimism through factors such as levels of inventory and high-value freight transport services. The latest air freight statistics from IATA (International Air Transport Association) show a market that is not in recession, however compared to previous strong health of air freight demand, things have deteriorated.
Growth in combined domestic and international cargo was negative, down 0.1% although international cargo routes saw a year-on-year growth of 0.4%. In the key Asia-Pacific market non-domestic demand increased by 5.5% year-on-year. Trans-Pacific is stable and Asia-Europe is growing. Rather it was the Middle-East which saw the most marked fall in demand, possibly a reflection of the response of shippers to the stabilisation of container shipping, to the problems in the Red Sea.
IATA, in their comments suggested that the slowing of growth started in October of 2024 in part driven by a weak peak-season. However, February 2025 is the first decline in growth since mid-2023.
The flow of capacity onto the market has also eased, with belly-freight rising slightly by 2.4% year-on-year whilst freighter capacity edged downwards by 0.7%. Again, this represents a cooler market than has been seen over the past several years. The moderation in belly-freight freight reflects a less buoyant passenger market in February.
These numbers do not describe a tariff driven recession. International air freight was still growing in February and total volumes remain higher than that in 2024. However, the numbers indicate that the market was weakening even as Donald Trump began to impose his tariff policy. Trade into the US and Europe was not depressed but its growth had moderated by the beginning of the first quarter. The role that e-retail volumes played in this is a good question, not least as they are supposed to be the target of de minimis regulation changes. What the market did not see in February was an inventory driven boom. It will be interesting to see if anything such as that appears in March.
Author: Thomas Cullen
Source: Ti Insight
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