Air cargo volumes and capacity are anticipated to rise significantly following a landmark agreement between the U.S. and China to enact a 90-day partial suspension of their ongoing trade war. The trade conflict had previously resulted in tariffs exceeding 100% on imports between the two countries and the imposition of duties on e-commerce shipments.
Key Details of the Agreement
After intensive negotiations over the weekend, both nations announced a substantial rollback of tariffs imposed since April 2. This includes:
A reduction of the previously applied 125% tariffs to a baseline rate of 10% from both sides.
A lower duty rate for de minimis shipments, primarily e-commerce parcels.
Continuation of a 20% U.S. tariff linked to the fentanyl crisis.
As a result, the U.S. tariffs on Chinese imports will now stand at 30%, while China’s tariffs on U.S. goods will be reduced to 10%.
This temporary agreement is expected to trigger a surge in transpacific air cargo activity, as businesses capitalize on the tariff suspension to accelerate shipments between the two markets.
Impacts on Air Cargo Dynamics
According to the TAC Index, the detente could result in a short-term rush to move goods from China to the U.S. Contacts suggest that the market is poised for both increased volume and capacity recovery as companies race to replenish depleted inventories during the 90-day window.
TAC Index also reported a slight recovery in airfreight rates last week, following a period of sustained declines. This trend may reflect adjustments in capacity as carriers withdrew freighters from the transpacific market due to the earlier tariff escalation.
"The recent standoff on trade and unprecedented tariff levels led to the cancellation of numerous block space agreements (BSAs), offset by a sharp reduction in transpacific freighter capacity," TAC noted.
"With the new U.S.-China trade agreement, we anticipate both volume and capacity to increase significantly as businesses move quickly to restock."
Market Reaction and Historical Context
A rush to ship cargo during favorable trade conditions would not be unprecedented. For instance, the International Air Transport Association (IATA) highlighted record-breaking air cargo demand in March, driven by front-loading shipments ahead of anticipated tariffs.
However, reports indicate that inventories are currently well-stocked, which could temper the magnitude of the surge.
Both nations have pledged to continue negotiations during the 90-day suspension. U.S. President Donald Trump expressed optimism, stating that it is unlikely tariffs will return to the recently imposed levels of 145%. However, he cautioned that tariffs could still "go substantially higher" if talks falter.
De Minimis Duty Adjustments
The agreement includes changes to de minimis duties for postal shipments from China and Hong Kong.
The duty rate for these shipments has been reduced to 54%, or a flat fee of $100, from the previous 120%.
Non-postal de minimis shipments will now pay the 30% standard rate applied to other imports.
The removal of the de minimis exemption for packages valued under $800 on May 2 initially caused a sharp drop in capacity between the two nations, compounded by China’s Labor Day holiday.
Industry stakeholders had expressed concerns that these higher rates and increased customs scrutiny on e-commerce goods could lead to a collapse in volumes and create a capacity overshoot.
Capacity Recovery
Despite earlier challenges, capacity on transpacific trade routes has begun to recover.
Figures from Rotate reveal a 26% increase in total cargo capacity between Asia Pacific and North America in the past 24 hours compared to the same period last week.
Widebody freighter capacity is up by a notable 40% week-on-week.
This recovery underscores the resilience of the air cargo industry and its ability to adapt quickly to shifting trade policies and market demands.
As negotiations continue, the 90-day suspension presents an opportunity for stakeholders to mitigate disruptions while preparing for potential long-term adjustments in U.S.-China trade relations.
Source: https://www.aircargonews.net/supply-chains/transpacific-volumes-to-rise-following-us-china-trade-detente/1080101.article
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