Concerns about a trade war between China and the US have shaken the global air cargo industry, with high-value transpacific shipping slowing through the Northern Hemisphere spring. Future demand is difficult to predict as the world’s two largest economies attempt to hammer out a trade deal to avoid sky-high tariffs and the US slaps import duties on countries around the world.
US President Donald Trump on April 2 announced a slew of tariffs, including a 145% tariff on Chinese imports. This level was later temporarily postponed—leaving the tariff level at a still high 30%. China and the US are working toward an Aug. 12 deadline to reach an agreement and avoid the reimposition of the US’ 145% duty and expected reciprocal tariffs by Beijing.
“Initially, when the 145% tariff on China was announced, it was shocking,” US-based Airforwarders Association executive director Brandon Fried told ATW. “That halted a lot of traffic coming in from Asia. But when the extension to Aug. 12 came out, that turned the spigot back on.”
But with a 30% duty on Chinese imports to the US in place over recent months and uncertainty about future levels, transpacific flows stayed soft.
After Trump’s April 2 tariffs announcement, “China to US volumes deteriorated sharply and remained weak throughout the rest of the quarter,” FedEx Corp. CCO Brie Carere said in a late June earnings call for the company’s fiscal fourth quarter ended May 31. “Our international export revenue was flat, reflecting the tariff-related impact on our transpacific trade lane. We expect revenue from the China-to-US lane to remain pressured … We just simply cannot predict how [the tariff situation] is going to play out.”
Concerns over tariffs and trade wars have accelerated a trend evident since the COVID pandemic of air cargo traffic moving from China to Southeast Asia.
“A lot of US import traffic has shifted over to countries such as Vietnam, Cambodia and Thailand,” Fried said.
In April, FedEx launched 6X-weekly Boeing 777F freighter flights between Singapore and Anchorage to help meet growing Southeast Asia-North America cargo traffic.
“Clearly, we are seeing growth from Southeast Asia, for example, Vietnam,” FedEx CEO Raj Subramaniam said. “We launched this direct flight … going from Singapore to the United States, which is a significant value proposition improvement for that market. We're [also] looking at Asia to Europe as an opportunity.”
He noted that India was “growing substantially” as a significant air cargo market. “The patterns are changing as we speak,” Subramaniam added.
But amid these changes, global air cargo demand has remained solid. “The air cargo market has maintained a stable trajectory despite market fluctuations,” Avianca Cargo CEO Diogo Elias told ATW. “Over the past few months, demand has slightly exceeded available capacity. The overall impact has been more moderate than initially anticipated. The air cargo industry is inherently dynamic, shaped by evolving demand and shifting market conditions. Today, market and context changes are occurring at an unprecedented pace.”
Supply Chains
Even if tariff pressures ease, companies have increasingly made supply chain changes to reduce reliance on China.
“Post-COVID, we already saw a focus on regionalizing supply chains,” Carere explained. “There was that impetus to diversify, and I think that there's going to be a continuation … India comes to mind right now. We have a relatively small revenue base [in India], but they are really doing well from a profitable growth perspective.”
According to IATA, the Asia-Pacific region has the largest share of the world’s air cargo traffic at 34.2% as of April, followed by North America (25.8%), Europe (21.5%) and the Middle East (13.6%).
According to Boeing’s 20-year World Cargo Forecast issued in November 2024, China was the largest transpacific air cargo trade market for North America (90% of Asia-North America trade is to/from the US), accounting for 55% of North American transpacific air cargo imports and 37% of exports.
“As a result, the overall transpacific market trends [for air cargo are] highly dependent on relations between the two large economies,” Boeing stated in the forecast. “Risks posed by geopolitical tensions and pandemic-era disruptions have prompted companies to diversify their supply chains beyond China to Vietnam, Thailand and Malaysia, raising those countries’ collective share of North American imports from 10% in 2017 to 17% in 2023.”
This supply chain diversification gives Boeing confidence in robust air cargo growth over the next two decades. “Increasingly, multi-node supply chains will depend on air cargo for reliable and timely connectivity across different stages of the manufacturing process,” Boeing said.
The aircraft OEM forecasts global air cargo traffic, as measured in cargo ton kilometers, will grow at an annual average rate of 4% through 2043.
Boeing projects express carriers, which accounted for 18% of global air cargo traffic in 2023, will see traffic grow at an average annual rate of 5.8% through 2043. “Due to their greater flexibility in handling express cargo, general cargo as well as e-commerce, these carriers are anticipated to outpace overall industry growth and increase their market share to 25% by 2043,” Boeing said.
In the near term, Boeing expects e-commerce revenue “to rise around 9% per year through 2029, with the fastest growth in the emerging markets of South Asia and Southeast Asia.”
Overall, Southeast Asia markets “will see the highest traffic growth per year, driven by expanding economies and consumer demand,” Boeing concluded, forecasting East Asia-North American air cargo volumes will grow by 2.3 times between 2023 and 2043.
Investment Shortfall
A big headwind that could temper expected growth is a lack of investment in cargo facilities by airports focused on multi-billion-dollar expansions of passenger terminals, Fried said, noting many major airports haven’t made serious investments in cargo for over 50 years. One manifestation is severe truck congestion at airport cargo facilities, raising costs and delaying deliveries.
“With the exception of a few airports that are doing some token investments, these big airports are all about the passengers,” Fried explained. “But you also have to understand that a city's economic vitality is often linked to the goods coming off those planes. And if your truck tendering a shipment to an airline has to wait in line for seven, eight or nine hours, the cargo could miss a flight.”
He added: “It's going to cost you a lot of money paying for those truckers waiting at those airline cargo terminals. Oftentimes those costs are not recoverable for freight forwarders. The main focus for airport dollars seems to be shiny terminals and nice polished chrome handrails for the passengers, but nothing for cargo, and we need that to change.”
This can be shortsighted for airports because there is often a direct tie between belly cargo and attracting new passenger routes, particularly long-haul international services.
Noting that San Francisco International Airport (SFO) needed to build back transpacific passenger routes following the pandemic, SFO CFO Kevin Bumen said airlines considering belly cargo capacity was a critical factor in recovering international traffic. “That cargo piece in some cases really makes the flights economically viable,” he explained at the American Association of Airport Executives conference in Atlanta in June. “So, if you're thinking about international routes and what may be a prospect market, you really need to take the time to try and understand the cargo dynamic because it can start to shape what is possible or maybe isn't possible in terms of passenger flights.”
Fried said that while belly cargo generates only about 5% of revenue on a passenger flight, it can make the difference between a route being profitable or not. “I've never been in the presence of a high-ranking airline executive where that individual didn't mention cargo oftentimes as the tipping point between profitability and unprofitability on a particular route,” he said.
“Cargo could be up to 30% of the profitability for that carrier on a route. The airline can say our passenger loads might be fickle, but we can depend on cargo on those planes and cargo prices at a high rate more consistently.”
Elias said cargo operators need to act nimbly in the current environment. “One of the biggest challenges, and opportunities, lies in the industry's ability to react quickly,” he explained. “In a business where cost structures are exposed and margins can shift overnight, especially for dedicated freight operators, agility is everything. Cargo carriers have to navigate market swings with much more precision.”
Listen to the full interview with Airforwarders Association executive director Brandon Fried on the ATW Window Seat podcast: https://bit.ly/BrandonFried
Related Content
