The air cargo sector is bracing for a potential decline in demand for US-bound services following the introduction of new tariffs by the United States, which are expected to impact import volumes significantly.
US President Donald Trump has ignited fresh economic tensions by imposing an additional 25% tariff on all imports from Canada, though it has been postponed by 30 days, and a 10% tariff on Chinese goods. Additionally, a 25% tariff on imports from Mexico was announced, but its implementation has been postponed by a month.
The last time tariffs were imposed on Chinese goods in 2018, followed by European imports, there was a surge in air cargo shipments ahead of the deadline, only to be followed by a sluggish year for the industry in 2019.
These latest tariffs have been enacted under the International Emergency Economic Powers Act (IEEPA) as a measure to address what the administration describes as an “extraordinary threat posed by illegal aliens and drugs,” according to a statement from the White House.
“President Trump is taking decisive action to ensure Mexico, Canada, and China uphold their commitments to combat illegal immigration and prevent the influx of illicit drugs, including fentanyl, into the United States,” the statement read.
The tariffs on Mexican and Canadian imports will take effect from February 4, with the White House stating they will remain in place until the US government deems that progress has been made in addressing illegal immigration and drug-related concerns. There is no specified duration for the tariffs on Chinese goods, but given the history of prolonged trade disputes between the US and China, a swift resolution seems unlikely.
The Executive Order includes provisions for retaliatory tariffs should affected nations respond with countermeasures. Canada has already announced a 25% tariff on CA$30 billion worth of US imports, effective February 4. China is also expected to impose retaliatory measures.
Furthermore, Trump has signaled that imports from the European Union could also face tariffs, though specific details regarding their scope and timing have not been provided. When asked about potential tariffs on the UK, Trump responded, “It might happen, but it will definitely happen with the European Union.” He added that while the UK was “out of line,” he believed the issue could be resolved through negotiation.
At a January 21 press conference, Trump reiterated that tariffs on the EU were under consideration to address trade imbalances. “They are going to face tariffs. It’s the only way to restore fairness,” he stated.
The new tariffs could lead to increased costs for shippers, prompting them to reconsider their supply chain strategies. Airlines, freight forwarders, and ground handlers may feel the effects, especially in industries that rely on air freight, such as automotive, electronics, and pharmaceuticals.
Logistics firm Aramex recently cautioned UK exporters that US-imposed tariffs could result in higher supply chain costs and shipment delays. Rising expenses might push some companies to shift production closer to home, though experts warn that nearshoring manufacturing to the US presents its own challenges.
Chris Clowes, executive director at global supply chain consultancy SCALA, warned that an escalating trade war with four major trading partners could have negative consequences for the US economy. “Bringing manufacturing back to the US may prove difficult due to the higher cost base and the scale and expertise that overseas operations provide,” he said.
He further cautioned that these tariffs could lead to cost-push inflation, ultimately making goods and services more expensive for consumers and weakening purchasing power.
In addition to tariffs, e-commerce businesses are preparing for further disruptions following the US government’s decision to eliminate the de minimis exemption, which allows imports valued under $800 to enter duty-free. This policy change will apply to goods from China and Canada, and potentially Mexico, depending on whether tariffs proceed as planned.
The White House’s executive orders explicitly state that duty-free de minimis treatment under 19 U.S.C. 1321 “shall not be available” under the new directives.
On January 17, US Customs and Border Protection (CBP) proposed new regulations aimed at restricting the use of the de minimis exemption. According to CBP, the volume of shipments using the exemption has surged by more than 600% over the past decade, posing risks related to health, safety, and security.
“Low-value e-commerce shipments present the same risks as higher-value goods,” CBP stated.
National Economic Advisor Lael Brainard echoed this sentiment, emphasizing the need to ensure fair competition for US businesses. “We cannot allow Chinese-founded e-commerce platforms to gain an unfair advantage while American companies follow the rules,” she said.
The Office of the United States Trade Representative reported that in 2022, China was the top supplier of goods to the US, accounting for 16.5% of total imports. The top five suppliers of US imports in 2022 were: China ($536.3bn), Mexico ($454.8bn), Canada ($436.6bn), Japan ($148.1bn), Germany ($146.6bn). Imports from the European Union totaled $553.3bn.
With tensions escalating and retaliatory measures likely, the global trade environment remains uncertain. The coming months will determine the extent of disruption these tariffs will bring to supply chains and the air cargo industry.
Source: aircargonews.net