Air cargo growth rate forecasts have been slashed, owing to the weaker economic outlook and the impact of tariffs and de minimis ban.
As the 2 May deadline for the end of the de minimis exemption for China approaches, the outlook is bleak. In January, Trade Data Service’s forecast was for growth of between 3.5% and 7.4% in air cargo; that has been cut to between –0.1% and 0.7%.
“This is driven by a weaker economic outlook globally, as well the potential loss of about one-third of transpacific air cargo volumes due to US de minimis rule changes,” noted the data company. “There is more downside risk than upside potential to this forecast.”
Noting the impact of cross border ecommerce in recent years on air cargo, Trade Data Service said its five-year growth expectations had fallen from 2.8% to 5.5%, to a range of 2.2% to 3.6%, triggered primarily by “US tariff policy and the loss of the de minimis exemption”. It added that the IMF had also slashed trade growth forecasts, from about 3.2% to 2.8%.
With the US responsible for some 17% of international air cargo volumes, and about one-third of volumes from Asia, Trade Data Service said its new forecasts assumed a loss of 75% of this traffic this year, due to the ending of de minimis, but “growth in line with the overall market, thereafter”.
“We do not believe there will be a significant shift of this volume to other markets, although we note that so far this year growth to non-US destinations has accelerated.”
Rates and volumes have already dropped, according to WorldACD, although the latest figures include Easter, when the market tends to soften. Tonnage out of Asia Pacific fell 4%, and rates were down 3% in week 16. It noted that a difference between this Easter and last was that rates in 2024 were on the rise, despite a 5% week-on-week global chargeable weight decline; this year it was down 6%, with rates falling.
“Despite reports of a surge in ecommerce sales ahead of the 2 May end of ‘de minimis’ customs duty exemptions for low-value US imports from China and Hong Kong, traffic from China and Hong Kong to the US fell for the fourth consecutive week, losing 7%, WoW. Compared with week 16 last year, China and Hong Kong to the US combined traffic is down 16% – contrasting with a 3% drop for the Asia Pacific region as a whole to the US, driven by stronger exports from Vietnam (+42%), Taiwan (+30%), Thailand (+24%), and Japan (+12%). These figures do not include increased charter activity,” added WorldACD.
Average rates from China and Hong Kong to the US fell 5%, to $4.72 per kg, after seven consecutive weeks of rises. Despite additional volumes out of South-east Asia, rates fell 28% form Vietnam, from Singapore (down 11%), Taiwan and Thailand, each down 9%. For Asia Pacific to the US, prices fell 8%, to $4.93 per kg.
“There may be a late flurry of ecommerce traffic in the final days of April. But after that, there may be some diversion of freighter capacity onto other markets.”
Meanwhile, to Europe, pricing and volumes from Asia Pacific were more stable.
Later today, US Customs & Border Protection (CBP) is expected to release its new processes for handling former de minimis shipments, but some analysts are warning of chaos, which could impact air cargo even more.
“This is really a chaotic time for businesses, not just the logistics providers, but the importers and exporters in the US, and then globally. It’s a global economy, and the US trying to pull out of a global economy is very problematic,” Cindy Allen, CEO of Trade Force Multiplier & former CBP/FedEx exec, told the Freight Buyers’ Club podcast.
“The issue is 2 May: a polyester dress from China that is $25 today, after 3 May will cost 168.50% more. Is that viable for US businesses? For the most part, a lot of these companies are doing the math and saying ‘no’. So people are pausing. They have one to three months of stock in place.”
One of the toughest challenges will be calculating tariffs, which have become automated over the years, but Ms Allen noted that CBP’s ACE system was “having a hard time calculating the duty”. And she pointed to goods made with aluminium, such as toy cars or spice jars with metal lids, which now have to show where they were cast and smelted.
She noted that testing and integration of new processes usually took weeks, if not months, adding: “ACE has had to make these in a matter of days sometimes, and at the most a matter of weeks, and is struggling to make these changes.
“ACE can’t calculate more than two rates of duty at one time. So the customs brokers are now manually calculating this … when they are understaffed … and, a lot of folks in DHS just got a letter from Doge [US Department of Government Efficiency] encouraging folks to take early retirement. It’s a juxtaposition that just doesn’t make sense.”
Source: By Alex Lennane, The Loadstar
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