Cargo Chat: Trump tariffs unlikely to significantly impact air cargo

The air cargo community is assessing how a second Donald Trump presidency will affect the industry following his U.S. presidential victory on Nov. 5. [caption id="attachment_57146633" align="alignright" width="242"] Judah Levine, head of research at Freightos[/caption] During his campaign, the former president promised to boost tariffs, which would raise costs across the supply chain. Trump has said he will introduce a 60% tariff on Chinese goods and a 10% to 20% tariff on other imports in his second term. Judah Levine, head of research at digital booking company Freightos , told Cargo Facts that it is challenging to predict the Trump administration’s impact on air cargo and global trade. However, he expects shippers to attempt to move a great deal of cargo before any new tariffs go into effect. Protectionist measures, such as increased tariffs and renegotiated trade agreements, could disrupt supply chains while also creating new logistics opportunities, Airforwarders Association Executive Director Brandon Fried previously told Cargo Facts . And new tariffs on Chinese goods “would likely result in retaliatory measures,” Glyn Hughes, director general at TIACA, told Cargo Facts . “Ultimately, protectionism will impact global trade and therefore demand for air cargo services,” Hughes said. “Conversely, a focus purely on China could have the effect of shifting global production to other parts of Asia and therefore we could see new trade patterns emerging, adding to air cargo demand. However, this transitional approach to production would cause short-term disruptions.” But it is hard to make accurate predictions, air cargo experts agreed. “Trump tends to be a little more unpredictable in terms of actual policy,” Derek Lossing, senior adviser and founder of Cirrus Global Advisors, previously told Cargo Facts . “But increases in China tariffs should be watched, whether that’s an increase in tariff amount or a wider range of products that could be impacted.” Sitting down with Cargo Facts for further discussion, Levine said that since shippers and other air cargo industry stakeholders have time to make plans before Trump takes office in January, they will likely “pull forward” shipments to beat the clock on new tariffs. What follows is an edited version of the conversation with Levine. Cargo Facts: Trump has promised a 60% tariff on Chinese goods and a 10% to 20% tariff on all other imports. How will such tariffs affect the air cargo industry? Judah Levine: So, the tariffs primarily will impact ocean freight. When tariffs are introduced, if there's enough advance warning, usually shippers will pull forward or front-load volumes they normally would've shipped later on in order to bring them in before the tariffs go into effect. This is something we saw with the Trump tariffs in 2018 and 2019. The 25% [tariff] on some goods went into effect in January of 2019 and, in that time, we saw volumes increase and we saw freight rates double. And then we saw lower freight rates and lower volumes the following year. Certainly, the spot market rates have gone up, but if ... the bulk of those volumes aren't going by the spot market, then that represents kind of a different picture in terms of yields. So, I'm not sure exactly how profitable e-commerce is despite the very strong volumes that we’re seeing for carriers. CF: How would you expect the tariffs to affect spot versus longer-term contract rates? JL: For e-commerce volumes , these are really high-volume players and they're not operating on the spot market. But certainly, using capacity for e-commerce for these large volume shippers does remove capacity for other players. As we get into peak season, capacity's going to be very tight and it's going to be very difficult for shippers and forwarders to secure capacity. And certainly, we've seen rates increase. We saw rates go up to about $7 per kilo level from China to the United States in the last few weeks, up from about $6 for most of the year. But I haven't seen or heard reports that it's extremely difficult to find capacity. This wasn't a surprise. It's been this way basically for more than a year, that e-commerce volumes are taking up a lot of capacity. So, I think a lot of forwarders made moves to secure capacity in advance. [They made] sure they had blocked space agreements and dedicated capacity ahead of time so that when there was an increase in demand in Q4, they would be prepared. We're not in the thick of peak season yet and I'm sure there will be segments of shippers that will find it difficult to secure capacity if they haven’t taken steps in advance. CF: Trade is also being impacted by the wars in Ukraine and the Middle East and the attacks in the Red Sea , which is shifting some cargo to air. How do you think Trump's presidency and policies might benefit or hurt international trade going through these regions? JL: So, we have seen some shift from ocean to air due to the Red Sea diversions. I think they were more pronounced early on ... and then, once shippers got used [to the disruptions] or [were] able to kind of accommodate or adjust to the longer lead times by ocean, there was somewhat less pressure on the air cargo market. We've still seen rates stay elevated, especially out of India, although ocean logistics rates are falling now and pressure seems to be easing, which may at some point lead to a reduction in air cargo rates. [And the war in Ukraine] has been a source of either disruption or tension between carriers who are able to fly over Russia and carriers who aren't. And American carriers have to take longer routes because there's an airspace ban for them. So, if this were to end, that would kind of restore a balanced playing field in terms of U.S. carriers and other European carriers who are avoiding Russian airspace. How and whether the Trump administration will impact either of these two issues is hard to say. Register now for Cargo Facts' essential regional events for industry stakeholders: Cargo Facts LATAM 2025 on Feb. 10-11 at the Pullman Sao Paulo Guarulhos Airport in Brazil; Cargo Facts Asia 2025 on March 24-26 at the W Shanghai in China; and Cargo Facts EMEA 2025 on May 6-8 at the Shangri-La Bosphorus in Turkey.

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