Air cargo flies into geopolitical crosswinds

“Recent geopolitical developments, especially aggressive tariff policies, trade retaliation, and the unravelling of favourable trade exemptions such as de minimis are driving structural changes in global air cargo flows,” said Brendan Sullivan, Global Head of Cargo at International Air Transport Association (IATA).

Recent developments highlight the growing influence of political and diplomatic tensions on global air cargo. From the prolonged airspace closures between India and Pakistan, triggered by security concerns, to temporary shutdowns of Europe’s Munich Airport following drone sightings, and border disruptions between Poland and Belarus due to Russia-led military exercises, supply chains are increasingly at the mercy of geopolitical events.

Photo: Dimerco

As global trade routes intersect with political manoeuvring, air cargo operators are forced to rethink strategies, invest in resilience, and adapt to a world where diplomatic disputes, military activities, and security threats can instantly reshape the flow of goods. The era of geopolitically neutral skies is fading, and supply chains must now navigate a landscape where politics and trade are inseparably intertwined.

US tariffs and global trade disruption
“Geopolitics is no longer a backdrop to trade — it has become one of its main drivers,” said Alina Fetisova, Trade Facilitation Programme Officer at the International Trade Centre, a joint agency of the United Nations (UN) and the World Trade Organization (WTO).

“Flights now take longer and require different routing (due to Russian airspace closure), which affects both capacity and scheduling.”
Anna-Maria Kirchner, Finnair Cargo

Earlier this year, US President Donald Trump imposed sweeping tariffs on imports from multiple countries, citing the need to protect American manufacturing, create jobs, and reduce the US trade deficit. The tariffs, applied as a percentage of product value, have reshaped trade flows. India and Brazil face 50% tariffs, South Africa 30%, Vietnam 20%, and Japan and South Korea 15%. Specific categories affected include steel, aluminium (excluding the UK), copper, automotive parts, heavy-duty trucks, cabinets, and branded pharmaceuticals, with some products taxed up to 100%.

The UK negotiated the lowest tariff rate so far at 10% on vehicles and beef, while the EU agreed to 15% for most goods. Crucially, the removal of the de minimis threshold for imports under $800 has directly impacted e-commerce shipments from Chinese platforms such as Shein and Temu. While tariffs boosted US government revenues to $28 billion in June 2025, they also raised costs for consumers and businesses, slowed domestic manufacturing growth, and prompted trade disputes and legal challenges.

“Overall air cargo demand remains resilient, but the geography of trade is shifting in response to policy risk and strategic realignment.”

Brenden Sullivan, IATA

However, that didn’t dampen the air cargo demand. In fact, the IATA report shows that global air cargo demand rose 4.1% year-on-year in August 2025, with international demand up 5.1%. Though the demand has gone up, shippers are shifting high-value goods away from North America towards Europe–Asia, intra-Asia, Middle East–Asia, and Africa–Asia lanes. Asia-Pacific carriers rose +9.8%, African airlines +11%, while North American carriers fell -2.1%.

WorldACD data also highlights some structural changes: Asia–US tonnages increased +5% despite falls from China/Hong Kong and South Korea, while Vietnam, Taiwan, and Thailand shipments rose +40%. At the same time, China–Europe cargo rose +12% following higher tariffs and the end of de minimis exemptions. China Customs reported cross-border e-commerce exports to Europe up +58% year-to-date, with August alone surging +55%.

“It is astonishing to see how quickly China’s big e-commerce players have been able to pivot towards Europe to boost their growth since the US’ decision on de minimis,” said Niall van de Wouw, Xeneta’s Chief Airfreight Officer.

IATA’s Sullivan echoed the shift saying, “Traditional high-volume corridors like Asia–North America are contracting, while alternate routes (Europe–Asia, intra-Asia, Middle East–Asia, and Africa–Asia) are gaining share. Commodity flows are also being reshaped, with higher-value, time-sensitive goods the most likely to shift by air. Overall air cargo demand remains resilient, but the geography of trade is shifting in response to policy risk and strategic realignment.”

Lufthansa Cargo reports that ongoing geopolitical developments and global trade regulations are creating uncertainty and volatility in the air freight market. The airline has observed shifting trade flows, with Transpacific capacities increasingly redirected to Asia–Europe corridors, putting yield pressure on affected lanes. Volume volatility has emerged as announcements of new trade regulations often trigger short-term demand surges, with shipments front-loaded ahead of policy changes, while demand in certain consumer segments softens amid broader economic uncertainty.

Commodity shifts have also been notable, with time-critical goods such as semiconductors, pharmaceuticals, and automotive components seeing increased volumes as shippers seek to mitigate tariff risks and safeguard supply chains. Additionally, e-commerce flows are increasingly shifting toward Asia–EU lanes due to U.S.-China trade tensions.

As Heike Woerner, Head of Business Development at Lufthansa Cargo, mentions, “Air freight continues to play a key role for time-critical goods,” and the company is monitoring trade lanes closely to adapt to ongoing changes. She adds that Lufthansa Cargo’s strategy is designed to anticipate market shifts and maintain resilience amid geopolitical uncertainty.

As a result of these uncertainties and changing market demands, airlines are also adding new hubs and teaming up with new partners. For instance, Lufthansa Cargo navigates geopolitical challenges through network expansion & diversification, customer collaboration, and scenario planning. Lufthansa Cargo’s Woerner said, “We continuously model geopolitical scenarios to anticipate market shifts and support informed decision-making.” Network expansion includes new routing options via five European hubs—Frankfurt, Munich, Vienna, Brussels, and Rome—and collaboration with ITA Airways.

“Geopolitical developments can cause air cargo operations challenges on a number of fronts. Cancelling or re-routing some flights and potential operating cost increases are some of the actions airlines look to take in situations such as these.”
Ingrid Raj, DHL Aviation

Irrespective of the challenges, air cargo players continue to adapt. DHL Aviation’s SVP Global Aviation Commercial, Ingrid Raj, said: “Geopolitical developments can cause air cargo operations challenges on a number of fronts. Cancelling or re-routing some flights and potential operating cost increases are some of the actions airlines look to take in situations such as these.”

Freight forwarders are also adapting. Yngve Ruud, EVP Air Logistics at Kuehne+Nagel, said: “Tensions and trade policy changes can cause cargo flows to move away from certain countries, but they can also open up new opportunities which require rapid scaling of capacity and resources.” Citing an example, he added: “Vietnam is emerging as a leading global growth market. Kuehne+Nagel is seeing strong air cargo demand from our customers from Vietnam to the US, driven by high-tech, electronics and semiconductor cargo. To enable this growth, Kuehne+Nagel and Apex are operating 14 flights a week between Vietnam and the US.”

WorldACD also reported that new US tariffs have sharply disrupted India–US trade. Air cargo exports from India to the US, previously rising as buyers sought alternatives to China, surged +28% week-on-week ahead of the 50% tariff on 27 August, but volumes dropped -12% in week 35 and -14% in week 36 once tariffs took effect. Spot rates also fell to $3.99/kg, -22% below 2024 levels.

In contrast, India–Europe exports grew +8% YoY, while Sri Lanka–US volumes rose +13% in week 36, highlighting shifting trade corridors. The ITC spokesperson also mentioned, “Our simulations at ITC show that the combined effect of recent US tariff measures could reduce global export potential by $439 billion.” China alone loses $319 billion, while Canada and Mexico face nearly $190 billion losses each. By contrast, the UK could expand exports to the US by $91 billion.

“Kuehne+Nagel is seeing strong air cargo demand from our customers from Vietnam to the US, driven by high tech, electronics and semiconductor cargo.”
Yngve Ruud, Kuehne+Nagel

However, favourable conditions like 4% global trade growth, lower jet fuel prices, and improved sentiment, cushion some impacts.

Navigating through turbulence
According to Fetisova, ITC is focused on supporting SMEs and developing economies, which are highly vulnerable to geopolitical shocks. A survey of 2,500 SMEs across the US, Canada, Australia, and the UK found that tariffs disrupted operations for 62%, forcing many to raise prices, switch suppliers, or delay product launches. To ease these challenges, ITC reduces trade costs and delays through digitalisation, such as Sri Lanka’s electronic certificate of origin, which cut processing time by 93% and saved businesses $3.5 million annually.

Alongside digital solutions, ITC provides training and advisory services to help SMEs diversify markets and avoid over-dependence on single corridors. At the policy level, ITC promotes regional cooperation and trade facilitation through mutual recognition agreements and joint border controls. Building resilience is central to ITC’s work, from risk management and access to finance to AI-enabled tools that simplify customs, HS (Harmonised System) codes, and trade agreements, helping SMEs compete globally. Fetisova highlighted the potential of technology, noting, “According to the WTO, artificial intelligence could expand global trade by 34–37% by 2040 and raise global GDP by 12–13%. If low- and middle-income economies narrow even half of their digital infrastructure gap, their incomes could rise by around 14–15%.”

“Geopolitics is no longer a backdrop to trade — it has become one of its main drivers.”
Alina Fetisova, International Trade Centre

In air cargo, agility and flexibility are key. IATA’s Sullivan emphasised that airlines respond with innovation, digitalisation through the ONE Record initiative, sustainable aviation fuels, and operational efficiencies while maintaining safety and security. Similarly, Raj from DHL Aviation explained that swift decision-making is crucial for managing tariff-driven market shifts, controlling costs, and maintaining reliability. She said, “Failing to promptly adjust to the tariff-driven market shifts can result in heightened costs, operational challenges, revenue loss, and a compromised market standing for freighter operators,” adding, “The geopolitical landscape will always shape air cargo demand – the key is to always be agile. It is imperative to remain adaptable to market dynamics.”

On the other hand, Kuehne+Nagel has built a scalable, asset-light network and gateway model to adapt rapidly to market volatilities. Ruud explained, “Our network has over 30 gateways serving more than 90 origins, supported by 100 charters and 35,000 tonnes of commercial capacity, every week,” adding, “In short, the air network empowers clients to navigate volatility with speed and certainty, transforming air freight challenges into opportunities for growth and a competitive advantage.”

Looking ahead, Sullivan expects moderate cargo growth driven by e-commerce and regional trade, while geopolitical uncertainty continues to shape demand. Ruud highlighted growth prospects in cloud infrastructure, semiconductors, perishables, and healthcare.

Summarising the current air freight market, Kathy Liu, VP, Global Sales and Marketing, Dimerco Express Group, mentioned, “From September to November marks the peak season for air freight, and this year, demand growth is particularly strong in Southeast Asia, including Thailand, Vietnam, Malaysia, and Singapore. Rising production of high-tech goods, AI components, and semiconductors in these countries is driving increased shipments,” but warned, “Geopolitical unrest in regions such as Thailand, Indonesia, the Philippines, Nepal, Japan, the US, and across Europe may disrupt supply chains through protests, regulatory shifts, and unstable governments.”

Geopolitical turbulence and airspace challenges
Tariffs are just one side of the story. Ongoing conflicts between governments, security concerns, or natural disasters have triggered airspace closures and temporary airport shutdowns, adding volatility to air cargo operations. The WorldACD report also found that the wider air cargo market remains affected by such disruptions, including the impact of Labour Day in North America and flight interruptions in Hong Kong and Southeast China caused by Typhoon Tapah.

Recent geopolitical developments have also significantly impacted Finnair Cargo’s operations. The closure of Russian airspace following the Ukraine invasion eliminated Finnair’s strategic advantage of short, efficient routes from Helsinki to Asia. “Flights now take longer and require different routing, which affects both capacity and scheduling,” said Anna-Maria Kirchner, Head of Global Sales, Finnair Cargo. Despite these challenges, volumes have remained relatively stable, with a continued focus on high-value and time-sensitive goods such as electronics, pharmaceuticals, and components. Distances to Asian destinations have increased by 15% for cities like Bangkok, Delhi, and Singapore, and up to 40% for Japan and Korea.

“Momentum is particularly strong in Asia, especially Southeast Asia, where sustained investment in manufacturing, infrastructure and demand for e-commerce is generating robust export flows and increasing demand for air cargo.”
Heike Woerner, Lufthansa Cargo

Agility has been central to air cargo players’ response. During Covid-19, Finnair’s passenger aircraft were quickly converted to cargo-only operations, transporting essential goods like masks from Asia to Finland, strengthening crisis response capabilities. To address airspace restrictions, Finnair has restructured fleet usage, optimised schedules, and enhanced operational planning to maintain connectivity. Kirchner added, “From a customer experience perspective, we strive to mitigate the impact of disruptions on our clients’ logistics flows, ensuring reliability and transparency.”

Looking ahead, geopolitical trends will continue to shape air cargo demand and route planning. “The need for resilient and diversified supply chains will likely drive demand for reliable air cargo solutions, especially in sectors like healthcare, technology, and e-commerce,” she said. Routes will remain dynamic, and commodities may shift towards regionalised production, boosting intra-European and intra-Asian flows. Geopolitical agility, digitalisation, and sustainability will be central to future strategies, with Finnair Cargo committed to maintaining a robust, future-ready network.

Adding to that, Lufthansa Cargo spokesperson mentioned that air cargo growth will be driven by diversified trade lanes, evolving commodities, and strategic positioning in high-growth regions. She added, “Momentum is particularly strong in Asia, especially Southeast Asia, where sustained investment in manufacturing, infrastructure and demand for e-commerce is generating robust export flows and increasing demand for air cargo.” Demand will remain high for high-tech products, pharmaceuticals, e-commerce, and automotive components as supply chains adapt to global production and technology shifts.

At the same time, crises can create opportunities. While disruptions challenge airlines like Finnair, they can benefit carriers with access to Russian airspace, particularly those based in Central Asia, offering an advantageous hub for connecting the Eastern and Western worlds.