Air cargo faces a waiting game amidst fears of tariff war: Xeneta

 2025 began with lower-than-expected growth in global air cargo demand in January of just two percent year-on-year compared to the double-digit monthly increases throughout last year, but fears of a trade war over tariffs impacting volumes and growth forecasts for the year are premature, according to the latest update from Xeneta.

"January’s data was impacted by the earlier Lunar New Year reducing volumes out of China, but the big drop in demand was still a surprise," says Niall van de Wouw, Chief Airfreight Officer, Xeneta.

van de Wouw sees no immediate reason to change Xeneta’s +4-6 percent growth forecast for global air cargo in 2025 despite the market’s nervousness over new tariffs introduced by the United States – particularly on China -and their subsequent retaliation.

"The lower growth in air cargo demand in January was not down to President Trump, nor, entirely, the earlier Lunar New Year. It also compares to an unusually high comparison in January 2024. Nonetheless, the air cargo market is entering a period of uncertainty, which makes planning extremely challenging.

"The implementation of tariffs by the U.S. and the responses of China, Canada and Mexico are just the start of a negotiation. It’s all transactional. We could end up in a global trade war, but in the case of President Trump, we have someone who’s ready to negotiate everything and the rest of the world can influence the outcome as we have already seen. The consistency here is he’s looking for a deal."

Are e-commerce volumes sustainable?
Cross-border e-commerce demand was one of the main pillars fuelling global growth in air cargo volumes since Q32023. In 2024, China cross-border e-commerce shipments to the U.S. accounted for 25 percent of its total global sales, and filled over 50 percent of cargo capacity from China to the U.S., the update added. Suspension of the de minimis exemption could, therefore, have a profound impact on air freight capacity between China and the U.S. and beyond by prohibiting these import shipments from de minimis entry, increasing costs, and adding time-consuming entry filing requirements and potential customs delays.

Van de Wouw says: “E-commerce volumes out of China grew +20-30 percent last year, following similar growth in 2023, so it's going to take a sledgehammer to crack that level of consumer demand and I'm not sure blocking de minimis alone is enough. China e-commerce was not set up to take advantage of de minimis loopholes - it has taken advantage of consumer demand for cheap, fast goods.

"E-commerce products may be slightly more expensive if de minimis is removed, but they will still be cheaper than buying through retailers in the U.S. – but delays in receiving the goods due to operational disruptions could have a bigger impact than price because it takes away the attractiveness for consumers."

China’s e-commerce giants knew this day would come and will not allow a business model on this scale to collapse due to de minimis, van de Wouw added. "Even if de minimis is being blocked, the e-commerce retailers will still keep selling and shipping the goods. There may not be a significant impact on air freight rates in the short-term in this scenario, even if it causes chaos at the receiving airport in the U.S."

In the longer term, demand for e-commerce - and therefore freight rates - will only be impacted if the consumer feels the cheap price is not worth it if they face a longer wait to receive their goods, the update added. "In this scenario, we’d expect to see a major downward impact on freight rates at a global level but to predict this now would be to cry wolf. Let’s wait and see. Maybe nothing changes," says Van de Wouw.

Market performance in January
Global air cargo capacity showed a modest growth of two percent in January, lowering the dynamic load factor to 57 percent in January, the update added. (Dynamic load factor is Xeneta’s measurement of capacity utilisation based on volume and weight of cargo flown alongside available capacity.)

"Global air cargo spot rates in January remained 17 percent higher than a year ago, reaching $2.65 per kg and 56 percent above pre-pandemic 2019 levels. These elevated rates can be attributed to the e-commerce boom, limited air cargo capacity from slow aircraft production, flight rerouting due to Russian airspace closures, and the delayed adjustment of freight rates to supply-demand changes."

The largest increase was seen in trade from the Middle East and Central Asia to Europe, with the air cargo spot rate surging +63 percent from a year ago to $2.59 per kg, driven by ongoing Red Sea disruptions.

"A strategic shift in freighter capacity towards Asia-related trades contributed to moderate rate growth from North East Asia. Spot rates from North East Asia to Europe increased 19 percent to $4.40 per kg while rates to North America rose 14 percent to $4.38 per kg."

Van de Wouw says: "We don’t know what will happen, but we do understand that uncertainty is not good for trade confidence, and it doesn’t help investment. People like to see some kind of stability before they put their money down.

"If I was a shipper, I would not be rushing to make too many plans or take any drastic measures. I’d have my team ready to do things differently, but I’d wait to see what actually happens because, right now, there’s a lot of sabre rattling and noise but little clarity."