The International Air Transport Association (IATA) has revised its 2025 forecast for air cargo demand and revenue, citing the impact of escalating global tariffs initiated by the U.S. administration. The adjustments reflect a challenging freight market disrupted by protectionist trade measures.
Air cargo demand is now projected to grow by only 0.7% year-over-year, with airlines expected to transport 76 million U.S. tons, down from the earlier forecast of 80 million tons published in December. This revision comes after an all-time high in 2024 when air cargo volumes grew by 12%, according to aggregated industry data. IATA’s previous forecast anticipated a 5.8% growth rate for 2025.
Impact of Policy Changes on Cargo Volumes
The elimination of the de minimis exemption by the United States for parcels valued below $800 from China and Hong Kong has contributed significantly to declining air cargo volumes. This policy change has shifted e-commerce retailers away from direct-to-consumer shipping models toward domestic order fulfillment via ocean freight, which offers lower costs but longer transit times.
IATA estimates a 4.7% decline in cargo revenues, amounting to $142 billion in 2025, a notable decrease from the $157 billion projected in December. The reduction reflects slower global economic growth influenced by widespread tariffs and other trade restrictions.
The association also predicts a 5.2% drop in cargo yields, driven by weaker demand growth and lower oil prices. While higher jet fuel prices typically lead to increased fuel surcharges, which include additional profit margins, the current downward pressure on yields reflects broader market challenges.
Market Dynamics and Challenges
The updated projections suggest the air cargo industry may face a significant downturn in the second half of 2025, potentially disrupting the traditional peak season. Despite this, IATA reported strong performance in April 2025, with cargo demand increasing by 5.8% year-over-year and overall cargo traffic growing 2.4% during the first quarter.
Analysts attribute this early-year growth to businesses front-loading orders to mitigate the impact of anticipated tariffs. This trend was observed earlier in 2025, as shippers accelerated imports ahead of sweeping U.S. tariff implementations in April. A subsequent 90-day tariff suspension and reduced tariff rates on Chinese goods to 30% temporarily boosted air and ocean freight volumes.
However, the looming threat of renewed tariff increases has prompted many countries to retaliate, further straining the global trade landscape.
Broader Airline Industry Performance
From a holistic perspective, airlines are expected to achieve modest profitability in 2025, with total revenues increasing by 1.3%, slightly outpacing the 1% rise in total expenses. Passenger demand remains supported by strong employment and easing inflation, although growth rates are lower than previously estimated.
Overall, IATA projects airline revenue to reach $979 billion in 2025, down from the $1 trillion forecast in December. The net profit projection has been adjusted to $36 billion, marginally lower than the earlier estimate of $36.6 billion, resulting in a net profit margin of 3.7%.
Source: https://www.freightwaves.com/news/airlines-lower-air-cargo-forecast-amid-escalating-trade-war
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