With the tariff war creating economic turbulence nearly everywhere, it’s time to buckle up as it might be a bumpy ride.

Global trade uncertainty reached fever pitch with President Trump’s sweeping new tariffs against the U.S.’ main trading partners, a move he claimed will contribute to re-vitalizing and re-industrializing the domestic economy and protect and create jobs.

Effective 9 April, goods imported from around 60 countries were made subject to additional taxes ranging from 20% to 104% for Chinese products, triggering retaliatory measures, sending supply chains into a frenzy and raising the specter of a surge in consumer prices globally. Subsequently, the Administration has paused tariffs, with the exception of China. But how tariff negotiations will play out is very much an open question.

To a backdrop of what is fast developing as an economic war of attrition, Glyn Hughes, Director-General of the International Air Cargo Association (TIACA) talked to AJOT about the ripple effects on the air cargo ecosystem. He also commented on current market conditions and the growth outlook, as well as highlighting some of the main issues affecting the industry which pre-date the recent turbulence surrounding international commerce.

He began by severely criticizing Trump’s tariff policy which he claimed was seeking to disable or neuter global trade mechanisms.

“Sadly, there is a risk of irreversible damage as these measures may choke the flow of global commerce and could ultimately dismantle international trade frameworks.

“The policies and actions taken and the retaliatory measures they are provoking will ruin global commerce. Unilateral, protectionist trade decisions undermine multilateral agreements and will strain global economic interdependence.

Economic slowdown is an expected outcome, he noted, with consumers beating a retreat because of inevitable price rises for staple items, reducing discretionary spend.

“Ultimately, trade flows will slow and shift. But air cargo will be ready to respond wherever we are needed. In the meantime, we call upon governments across the globe to refocus attention on interdependent economic growth.”

First Quarter Review

Looking back on the first few months of 2025, Hughes said air cargo markets had performed quite well considering the volatile global trade environment.

However, the prevailing trend in air cargo mirrors that on the ocean freight side where volumes and rates have declined on the China-US trade since the imposition of 10% tariffs, from 1 February, on Chinese-origin US imports.

“We saw some ‘accelerated’ shipments trying to move before tariffs were applied but we’ve also seen other shipments cancelled as the hike in duties meant the cargo was no longer economically viable. We have also seen a decline in Asia-U.S. e-commerce, and this may get worse as we await impending changes to U.S. de minimis/filing requirements.”

Air cargo data at the end of last year showed air cargo load factors on the ex-China/Far East trade lane to the US and Europe at 80%+ compared to only half that percentage in the opposite direction.

At the time, the risk of this weighing on airlines’ round-trip yields was offset, at least partially, by the buoyant level of westbound rates which compensated for the relatively low rates into China.

“But with rates ex-China now coming under pressure due to demand shocks arising from tariff impositions, round-trip yields will suffer,” Hughes warned.

On the plus side, the first quarter of the year had seen cargo carriers demonstrate a flexible use of their fleets, taking advantage of the lull in demand post-Lunar New Year and switching aircraft from China and Hong Kong to Africa to cater for Valentine’s Day flower demand out of the continent, he revealed.

“Flexibility and agility are keywords for effective fleet management in response to ever-shifting market conditions. Capacity needs to follow demand spikes.”

Downturn in Growth Forecast?

At a webinar earlier this year, Hughes said that TIACA was expecting air cargo demand to grow by 5% in 2025, the projection based on economic stability being at its highest level for several years. However, the recent events have called this forecast into question.

“Unfortunately, I think the policies we are seeing from the Trump administration are likely to have a far-reaching impact across the entire global economy. The increase in tariffs implemented in the first weeks of April, targeting automotive and other industries and the anticipation of further retaliatory measures in return, only add to market uncertainty. So, it’s reasonable to assume that volumes will come under pressure and growth prospects will take a hit. At this stage, it’s difficult to analyze full year expectations but 5% (growth) may be very difficult to achieve.”

Red Sea Disruption

According to some commentators, the prospect of safe ship navigation returning in the Red Sea/Suez Canal zone has been put back by at least six months because of the U.S. attacks in March on Houthi positions in Yemen.

However, Hughes played down the degree of modal shift air cargo has enjoyed at the expense of ocean freight, due to the routing disruption.

“There were some initial benefits to air cargo volumes when the attacks first began but over the last 18 months it seems that most supply chains have rebalanced and accommodated the longer sailing times. Nevertheless, disruption in the Red Sea will continue to impact maritime pricing, efficiency and overall capacity availability, keeping rates higher than historical norms. The reduction in the rate differential between ocean and air means air cargo remains an attractive option.”

End of de minimis

One potentially major concern for air cargo is the impending end of the de minimis trade loophole/exemption for Chinese goods, set to take effect from 3 May, fueling fears of a further decline in cross-border e-commerce into the U.S. - a flourishing activity for the sector in recent years.

Hughes had previously commented that such a move would add significant cost and complexity to the trade. For example, an e-commerce shipment that is worth $5 could be subject to $5 or $10 in filing fees and administrative costs which could affect inbound demand.

“We need to see the final legislation to accurately determine the full impact. However, as its intent is to increase data and information related to low value e-commerce shipments to combat illegal and counterfeit trade, it is reasonable to assume that it is likely to add time and complexity to the shipping process. It will also increase the number of inspections so CBP will need to adjust manpower accordingly.”