News #115 - Tariffs, de minimis changes spark air cargo capacity shifts

The origin countries for Transpacific routes are evolving as shippers adjust production strategies to mitigate the impact of tariffs, particularly those involving China.

As airfreight volumes continue to decline, carriers are reallocating capacity to match these shifts, industry experts revealed to Supply Chain Dive.

Following the announcement of reciprocal tariffs by the Trump administration in April, cargo volumes between China and the U.S. have dropped by as much as 60%, according to Laurent Deneubourg, VP of Global Airfreight at Seko Logistics. The impact has been most pronounced in e-commerce shipments, which typically account for 60% of China-U.S. airfreight and 20% of global air cargo. In May, e-commerce bookings fell by 50%.

Beyond e-commerce, tariffs have significantly affected automotive volumes, fast fashion, consumer electronics, and toys—all categories heavily reliant on airfreight, industry experts noted.

End of De Minimis Exemptions Exacerbates Capacity Challenges

The May 2 removal of de minimis exemptions for imports from China and Hong Kong further dampened volumes, leaving excess air cargo capacity in its wake, according to Joe Kronenberger, SVP of Airfreight Product for the Americas at Geodis.

De minimis items alone previously accounted for 50% of airfreight volumes. With their removal, many shippers have canceled block space agreements and charters, Deneubourg added. The air cargo sector now faces an estimated $22 billion revenue loss over the next three years amid persistent trade uncertainties.

To adapt, carriers are redeploying capacity to alternative routes, such as those connecting Southeast Asia and the U.S., Kronenberger noted.

“While routes aren’t changing entirely, capacity adjustments are being made as demand fluctuates,” he explained. Kronenberger also mentioned that a 90-day pause on tariffs has provided some relief, stabilizing previously declining rates and filling some of the surplus airfreight capacity out of China.

For the week of May 27, airfreight rates from China to North America fell by 7% week-over-week to $5.14 per kilogram, marking their lowest level since March, Freightos reported.

Production Shifts Away from China

While Transpacific routes remain active, the origin countries for flights are shifting as businesses increasingly explore moving production out of China to mitigate exposure to U.S. tariff policies.

However, realigning procurement networks is a complex and time-consuming process.

“Shifting production and redefining company ownership to establish a new country of origin requires significant effort,” Kronenberger explained. “Nevertheless, clients are willing to undertake these changes to build more resilient supply chains amidst ongoing regulatory shifts.”

This trend is especially apparent in consumer technology, where some Geodis clients have already begun relocating production to Southeast Asia or India. In certain cases, companies have indicated that up to 50% of their shipments currently originating in China will soon be redirected to other countries.

Navigating Uncertainty in Trade Regulations

The rapidly changing trade landscape has made forecasting a challenge for logistics providers and shippers alike. Many companies are engaging in “tariff shopping” to find alternative strategies for mitigating tariff impacts.

For some, this involves relocating production away from China, while others are turning to bonded warehouses to hold cargo upon arrival, Kronenberger said.

“Shippers are grappling with the complexities of various tariff provisions and their interplay,” noted Brian Bourke, Global Chief Commercial Officer at Seko Logistics. The resulting uncertainty has led to scenario planning changes and, in some cases, a freeze on key business decisions.

“Many shippers are adopting a ‘wait and see’ approach, continuing to cancel orders from China,” Bourke added. “However, the real question remains: what happens when the safety stock they’ve been relying on runs out?”

Source: https://www.supplychaindive.com/news/air-cargo-tariffs-de-minimis-freighter-capacity/749577/

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