Air cargo coming to terms with de minimis end

The de minimis exemption will temporarily remain in place for products from China, Canada and Mexico even as U.S. tariffs on imports from those countries went into effect.

The exemption, which allows imports under $800 to avoid added duties, was slated to end as part of the tariff orders issued by the U.S. President Donald Trump. That plan changed when Trump amended the Canada and Mexico tariff orders, which meant duty-free de minimis imports are available until systems are in place for revenue processing and collection from imports.

Once the Commerce Secretary notifies the President that the requirements have been met, the de minimis exemption will cease for products from all the three nations.

The looming cancellation of de minimis eligibility for Chinese imports (majorly) is expected to significantly reduce the surge of e-commerce goods arriving in the U.S. by air that have kept planes full and air cargo rates highly elevated since late 2023.

The proposed move may also increase delivery times and push price tags up by as much as 50 percent for items that continue to ship by air, according to the latest update from Freightos.

Judah Levine, Head of Research, Freightos writes: "Temu and Shein had already begun preparations for a shift away from reliance on de minimis and air cargo, with more than a third of Temu’s U.S. orders reportedly already fulfilled from sellers with U.S.-based inventory. Nonetheless, these platforms are scrambling to adjust to the coming policy change by raising prices, pushing sellers to build up US inventories and incentivising manufacturing shifts to Vietnam and other China alternatives."

The temporary reprieve of the de minimis suspension for Chinese goods was aimed to allow U.S. Customs and Border Protection (CBP) to prepare for an anticipated surge of formal entry parcels, but it may also allow time for air cargo e-commerce import volumes to decrease to a more manageable level, the update added.

"There are already reports of e-commerce companies canceling freighter flights. And though China-U.S. air cargo rates have yet to collapse, Freightos Air Index data shows they have decreased below the $5/kg mark for the first time since August of last year, and are seven percent lower than a week prior though prices typically increase just after Lunar New Year. This trend may suggest that air rates could decline gradually up until de minimis is canceled and then more sharply once the change goes into effect."

The cancellation of de minimis could have meant over one billion e-commerce packages below $800 coming from China needed to move to provide additional information and duties.

The elimination of de minimis will have a combined 1-2 punch for global air cargo, says Derek Lossing, Founder, Cirrus Global Advisors. "We are anticipating up to a 60 percent reduction in China to U.S. e-commerce demand by the second half of Q2, which will leave freighter operators scrambling to re-deploy capacity throughout the world."

China to U.S. e-commerce is estimated to take 30 percent of Transpacific capacity, according to an analysis by Rotate.

E-commerce continues to significantly influence the air freight market, says Catherine Chien, Vice President, Digital Marketing, Dimerco Express. "Last year, we saw air freight rates rise after Chinese New Year, with no clear slack season anticipated for 2024. However, following recent announcements from the Trump administration related to e-commerce, the market has slowed down, particularly in the U.S. and Europe, since January 20.

"This slowdown has led to the cancellation of some e-commerce charter flights, disrupting the balance between supply and demand. While e-commerce remains a key driver, we expect a shift from a direct B2C model to a B2B2C approach."

Global demand stays firm
Global air cargo demand, measured in cargo tonne-kilometers (CTK), increased by 3.2 percent year-on-year in January, marking the 18th consecutive month of expansion. Available cargo tonne-kilometers (ACTK) rose by 6.8 percent, according to the latest update from the International Air Transport Association (IATA).

"The pace of growth has moderated compared to the double-digit surges witnessed in 2024. Additionally, yields remain higher than January 2024 levels, though they declined by 9.9 percent from December. Cargo load factors also fell by an average of 1.5 percentage points, underscoring shifts in market conditions."

The Asia-North America trade lane, a critical corridor for global supply chains, recorded a 6.1 percent increase in demand, extending its growth streak to 15 months. "Meanwhile, the Europe-Asia route saw a 3.2 percent rise, marking 23 consecutive months of expansion. The North America-Europe corridor posted the strongest growth among major routes at 9.7 percent, reflecting robust transatlantic trade."

Air cargo tonnages from Asia Pacific origins have continued to rebound towards their pre-Lunar New Year levels, with rates edging back upwards and remaining above their level this time last year, according to the latest weekly figures from WorldACD Market Data.

"Following a +20 percent rebound in week seven from their Lunar New Year dip, chargeable weight flown from Asia Pacific origins regained a further +six percent in week 8 (February 17-23), taking them close to their levels in mid-January, based on the more than 500,000 weekly transactions covered by WorldACD’s data."

Asia Pacific to Europe tonnages gained a further five percent following a +30 percent rebound the previous week, with China to Europe tonnages adding a further five percent. "Japan to Europe demand bounced back strongly with a +19 percent week-on-week (WoW) increase, close to its highest level this year. There were further WoW tonnage gains from South Korea (+seven percent), Vietnam (+ eight percent) and Thailand (+18 percent)."

The transition from B2C to B2B2C model is likely to reduce air freight demand while increasing ocean freight utilisation as logistics strategies adapt, adds Chien of Dimerco. "Recent conversations with airlines tell us that overall e-commerce demand would not be less but the airfreight part would not grow further (part as model shift highlighted earlier).

"Moreover, airlines may relocate more capacity from China/Hong Kong into Southeast Asia not only for the e-commerce impact but also for the China+ strategy. It may still be too early to fully assess the impact on the de minimis customs provision as details continue to unfold."

Trump triggers trade war
Trade wars are back in vogue and how....Trump decided to go ahead with 25 percent duties on Canada and Mexico, and 10 percent extra duty on China, which has set off reciprocal actions from its trade partners.

While China has announced additional tariffs of 10-15 percent on certain U.S. imports from March 10, Canada is imposing 25 percent tariffs on around C$30 billion of U.S. imports. Mexico is also planning retaliatory moves, according to President Claudia Sheinbaum.

The actions and reactions, which could affect nearly $2 trillion in trade, came into effect after Trump announced the countries are not doing enough to stop the flow of the deadly Fentanyl to the U.S.

"Even if we end up seeing some tariff relief, everyone and their mother ran to Google to search for recession today. That’s something no president wants to happen on their watch," Bloomberg reported.

Mexico was the top U.S. trade partner for 2024, totaling $840 billion. Canada ranked No. 2 at $762 billion, followed by China at $582 billion.

And the U.S. ran the highest deficits with China ($295 billion), Mexico ($172 billion) and Vietnam (#123 billion).

Tariffs are about making America rich again and making America great again, Trump said during his first address to the Congress after coming back to power in January.

"And it's happening. And it will happen rather quickly. There'll be a little disturbance, but we're okay with that. It won't be much."

Trump added that reciprocal tariffs relating to trading partners would "kick in" on April 2.