BLOG — Aug. 11, 2025
Air cargo carriers face capacity challenge as tariff frontloading ends
By Greg Knowler
The chaotic trans-Pacific trading environment is testing the ability of air cargo airlines to quickly shift capacity between trade corridors in support of rapid changes in Asian export volume.
Following a volume surge in July as US importers built up inventory ahead of the sweeping rollout of tariffs on US trading partners Aug. 7, freighter airlines now face the challenge of right-sizing capacity to match new demand levels.
C.H. Robinson wrote in a market update this week that international air freight markets were experiencing widespread capacity rationalization.
“The fundamental challenge has been one of timing: With new demand in July, carriers increased capacity, but importers completed inventory building earlier than expected, leaving airlines with excess capacity they must now remove to maintain profitability,” the forwarder noted.
C.H. Robinson said Asian carriers were particularly affected as the traditional peak season for electronics and consumer goods shipments to US and European markets has been disrupted by the frontloading cycle, forcing airlines to reassess capacity allocation across their networks.
“Airlines had reduced flights and reallocated aircraft, expecting lower cargo demand after July 9 when higher US reciprocal tariffs were originally scheduled to take effect,” the forwarder wrote.
“But when trade deal deadlines for most countries were pushed to Aug. 1 and China received a separate extension to Aug. [14] for negotiations, carriers found themselves with mismatched capacity,” it added.
Contrary to the usual seasonal summer lull, July saw an unexpected 5% increase in global air cargo volume following a modest 1% gain in June, according to rate benchmarking platform Xeneta.
The boost appeared to be driven in part by tariff-related frontloading, mode shift and persistent uncertainty, prompting businesses to expedite shipments, noted Niall van der Wouw, chief air freight analyst at Xeneta.
The robust rise in volume helped lift the dynamic load factor, which Xeneta data shows has returned to last year’s 58% level.
‘Piggybacking on the chaos’
“Air cargo is piggybacking on the chaos being caused by tariffs,” van der Wouw said in a market update this week. “While the growth in July will come as a pleasant surprise to many, this growth is not a consequence of increased trade. It is a sign of the creative ways companies are trying to circumvent the higher costs of tariffs.”
Despite the increase in demand, air freight rates along the trans-Pacific corridor weakened markedly in July. Xeneta data shows spot rates from Southeast Asia to North America declined 16% year over year to $4.87 per kilogram as earlier capacity constraints eased.
Rates from Northeast Asia to North America remained relatively flat at $4.81/kg, buoyed by robust demand out of Taiwan where spot rates climbed 9% year over year to $6.85/kg amid a surging appetite for AI and semiconductors.
Rates out of China, however, told a different story. Spot rates to the US declined 11% to $4.26/kg, weighed down by the US elimination of duty-free access for low-value imports from China and Hong Kong, heightened tariffs and market uncertainty.
Still, e-commerce continues to be one of the main drivers of global demand for air cargo, despite the US de minimis ban. For context, e-commerce shipments accounted for more than 50% of trans-Pacific air freight shipments last year.
Cathay Pacific CEO and executive director Lam Siu Por told analysts during the carrier’s first-half earnings call this week that more than half of the shipments handled in the world’s busiest air cargo hub of Hong Kong during the first months of the year were believed to be e-commerce.
“It’s very hard to tell which shipment is e-commerce or which one is traditional cargo, but e-commerce definitely makes up a good proportion of our export out of Hong Kong nowadays,” Lam said. “Some people say it’s probably close to half, if not more.”
Data from air freight analyst Rotate shows China’s e-commerce exports to the US fell 44% in July year over year, even as e-commerce exports to all other countries recorded robust growth of nearly 50%. Xeneta data for June shows China-to-Europe e-commerce volumes rose 90% year over year, supported by a shift in capacity from the tariff-hit trans-Pacific trade lane.
De minimis ban extended to all US trading partners
The current challenge for air cargo operators is to assess the impact of President Donald Trump’s executive order last week extending the US’ de minimis ban to all its trading partners from Aug. 29.
Under the “De Minimis Executive Order,” all goods that are shipped through the international postal network are subject to a tariff equal to the effective reciprocal tariff rate applicable to the country of origin of the product: a flat rate of $80 per item for countries with an effective reciprocal tariff rate of less than 16%, $160 per item for countries with a tariff rate between 16% and 25%, or $200 per item for countries with a tariff rate above 25%.
“The latest executive order that extends the suspension of de minimis exemptions to affect all points of origin will add complexity to international trade in e-commerce, which typically would fall below the previously established $800 limit,” Glyn Hughes, director-general of The International Air Cargo Association, told the Journal of Commerce.
Hughes said market calculations assessed that more than 1.2 billion shipments fell under the US’ de minimis limit during 2024. He added that the operational implementation of duties to all low-value shipments previously exempted would add additional cost and complexity.
“We can expect demand to suffer, and markets will continue to shift,” Hughes said.
Originally published in the Journal of Commerce, Aug. 8, 2025
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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