Supply Chain Scanner - Week of April 28, 2025
Weekly blog by Emily Atkins
Seismic shift in cargo modes coming as a result of trade war
E-commerce volumes, which have for a long time bolstered global air cargo demand, are facing up to the ‘seismic shock’ of the United States ‘Liberation Day’ global tariffs announcement. At the same time, the general cargo market is reevaluating its future as shippers, forwarders, airlines, and consumers come to terms with the economic reality of new import taxes and a potential international trade war.
In the U.S. the ‘de minimis’ rule exempting postal shipments valued at less than US$800 from duties has been removed, and these shipments, a staple of e-comm orders from China, will become subject to a duty rate of either 30 percent of their value or US$25 per item (increasing to US$50 per item after 1 June 2025).
Already reeling from the potential impact of U.S. actions, global air cargo demand is likely to suffer further harm from retaliatory actions by other countries. EU president, Ursula von der Leyen, called the U.S. decision “a major blow for the world economy.”
After more than a year of double-digit growth, air cargo now faces an uncertain future. "In my 30 years working in the air freight industry, I cannot remember any other unilateral trade policy decision with the potential to have such a profound impact on the market at a global level," said Xeneta’s chief airfreight officer, Niall van de Wouw.
“E-commerce has been the main driver behind air cargo demand. If you suddenly and dramatically remove the oxygen from that demand, it will cause a seismic shock to the market," he added.
Cross-border e-commerce has evolved as the major driver for global air cargo demand growth in recent years. China-to-US e-commerce shipments alone account for roughly half of the cargo capacity on this eastbound corridor and around six percent of global air freight demand. A disruption to this demand will free up a significant part of this corridor’s cargo capacity and spread its impact to the rest of the market, van de Wouw said.
New air cargo market data for March showed shippers and forwarders were hedging bets and buying time before making longer-term commitments to air cargo capacity as they waited to see how the impact of newly imposed tariffs and international trade tensions unfolded.
Shippers negotiating contracts in Q1 2025 preferred shorter-term agreements of three months or less, representing 79 percent of contracts – an increase of nearly 20 percentage points year-over-year. Meanwhile, freight forwarders continue to place approximately 45 percent of their volumes in the spot market.
“With the growth of rates slowing overall, we’d normally expect to see shippers making longer capacity commitments to achieve more competitive rates, but, right now, this is clearly a gamble few shippers are ready to take – and this is before we’re even seeing tariffs impacting volumes,” van de Wouw said.
On the container shipping side, U.S. West Coast ports have seen a dramatic decline in vessel calls. And the situation is likely to worsen as import volume from China drops off in the face of U.S. tariffs on Chinese goods and potential penalties on Chinese shipping.
Ryan Petersen, CEO of Flexport, posted on X on April 23: “In the 3 weeks since the tariffs took effect, ocean container bookings from China to the United States are down over 60 percent industry-wide.”
The Port of Los Angeles reported a surge in inbound tonnage between April 20 and 26, with a 56 percent bump from the same week in 2024, and then a dramatic drop off projected for the following two weeks, with tonnage declining 11 percent and 31 percent each of those two weeks.
Carriers blanked 81 sailings in April on the transpacific lane. Hapag-Lloyd said 30 percent of its bookings on that route had been cancelled, and that it was shifting cargo to smaller vessels.
And although Trump has suggested reducing the tariffs on China, the damage has been done in the short term, at least. The trickle-down effects will be felt across the U.S. and for goods being shipped to Canada.
Further complicating an already chaotic situation, the us president signed an executive order that may result in massive penalties being applied to Chinese shipping. Fees will be applied, starting in six months, to Chinese vessel owners and operators based on net tonnage per U.S. voyage.
Starting at $50 per net ton, the fees will increase annually by $30 increments, reaching $140 per net ton by 2028. Fees are capped at five assessments per year, applied at the first point of entry. On a full containership loaded with 15,000 boxes, this could mean fees of $1.8 million. Non-Chinese operators using Chinese-built vessels will face fees at a lower rate – $18 per net ton or $120 per discharged container, rising incrementally until 2028, maxing out at $33 per net ton or $250 per container.
These penalties could mean new business for Canadian West Coast ports, even though the same executive order is forcing goods landed in Canada or Mexico to be assessed a 10 percent service fee for avoiding U.S. ports. These new fees may increase the cost of transportation for American shippers, effectively reducing the cost of Canadian exports, particularly farm products.
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Emily Atkins
President
Emily Atkins Group
Emily Atkins is president of Emily Atkins Group and was editor of Inside Logistics from 2002 to 2024. She has lived and worked around the world as a journalist and writer for hire, with experience in several sectors besides supply chain, including automotive, insurance and waste management. Based in Southern Ontario, when she’s not researching or writing a story she can be found on her bike, in a kayak, singing in the band or at the wheel of her race car. LinkedIn: https://www.linkedin.com/in/emilyatkinsgroup/