On April 2, U.S. President Donald Trump announced a sweeping and encompassing global tariff, paired with reciprocal tariffs targeting nearly 60 countries.
Analysts warn that global trade and supply chains could face severe disruptions as 10% tariffs take effect April 5, followed by reciprocal tariffs starting April 9.
Trump also issued a separate order suspending "de minimis" exemption eligibility for all low-value shipments from China and Hong Kong starting May 3, potentially stalling e-commerce, which has been a major boost for the air cargo industry in recent years.
Peter Sand, chief analyst at Xeneta, described the newly announced U.S. tariffs as unprecedented in both geographic scope and financial impact.
"It is impossible to downplay the significance of the tariffs imposed by President Trump because they are on a scale never seen before, both in terms of geography and financial severity," he said.
"The tariffs will shift global trade on its axis, and the impact will be profound and lasting," he added, noting that overcoming these challenges will be "painful".
Tariffs are "so broad and so high"
Judah Levine, head of research at Freightos, said the new round of tariffs "absolutely dwarfs the measures implemented by his first administration and pushes U.S. trade barriers to their highest levels since the 1930s."
"There is really no comparing Trump's trade war this year with the steps he took starting in 2017," Levine said. "The scope of the current duty rollouts are far larger in terms of the level of tariffs on China and in terms of the extremely high levels being applied to the rest of the US's trading partners."
Levine noted that trade — even the US's importing activity — has continued to grow since 2017, even if trade flows shifted. Intra-Asia trade has climbed as other Asian countries increased manufacturing for the US market, and China-Mexico trade surged as China invested heavily in Mexico as an alternate route to the US market.
"This time though, the tariffs are so broad and so high that there are few duty-free alternatives. In other words, US import costs will inevitably go up," he said. "Retaliatory tariffs will also mean that demand for US exports is likely to drop."
The head of research at Xeneta noted that import price hikes, which often lead to higher costs from domestic manufacturers as well, will "mostly be passed on and felt by consumers, which could increase the inflation rate and depress consumer spending."
"Most economists are now predicting slower and modest US GDP growth, an increased likelihood of recessions in the US and beyond, and therefore a possible contraction of global trade as well. If things do play out this way, the freight market will suffer, too," Levine said.
In terms of air cargo, Levine said the general economic impact of the trade war could also be a major factor in demand for air cargo and, therefore, volumes and rates in the near term and beyond.
He cited that there have been multiple reports already of canceled China- US BSAs, canceled charters, carriers shifting capacity elsewhere, and other signs and expectations of volume decreases resulting from a drop in e-commerce volumes in anticipation of de minimis changes.
China – US air cargo spot rates have also eased so far this year but certainly have not collapsed, remaining much higher than the long-term norm.
"We can probably expect some rush of last-chance demand and then a significant drop right around the May 2 rollout date. This pattern will likely push rates – as well as possible delays and congestion – up in the coming weeks, and then see rates on this lane drop, probably sharply, in May," Levine said.
"Even with this change, though, some e-commerce will likely still go by air, which could prevent a complete rate collapse," he added. As capacity is redistributed, Levine noted that the industry could see "knock-on downward pressure on rates on many other lanes."
In terms of ocean freight, Levine said anticipation of tariffs has driven many U.S. importers to frontload as much inventory as possible since November and could lead to "very subdued peak season demand" for 2025.
"With the reciprocal tariffs not being applied to goods loaded before April 9th, we may see a very brief scramble that will push container rates and demand up for the next few days," he said, noting that after that, many importers who've built up inventory are likely to be able to reduce or pause orders and shipments until the tariff dust settles.
"This move will see container volumes and rates drop, possibly significantly, soon and could be one factor that will cause a very subdued peak season period this year – similar to how a tariff-driven pull forward in 2018 led to somewhat lower container rates and demand in 2019," Levine said.
The Freightos head of research went on to note that once inventories run down, the strength of the container market will depend on the economic impacts of the trade war.
"Lower consumer demand will lower demand for freight. These trends will put downward pressure on container rates, which have already been falling globally – despite Red Sea diversions continuing to absorb capacity, and even on the transpacific where frontloading has kept demand relatively strong – as new carrier alliance rollouts have increased competition and fleet growth is already leading to overcapacity. Together, these factors could potentially see container rates reach extremely low levels," Levine added.
