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Impact of New US Tariffs on the Air Cargo Sector
With the Trump administration’s new tariffs now in place, what are the implications for the aviation market? Herman Tse, Valuations Manager at Cirium Ascend Consultancy examines the impact of the US tariffs on the air cargo sector and freighter market.
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Team Perspective
Herman Tse
Valuations Manager
Cirium Ascend Consultancy
On 1 February 2025, the Trump administration announced three Executive Orders that will significantly affect tariffs on imports from Canada, Mexico, and China. The modifications regarding tariffs on goods from China and Hong Kong took effect on 4 February while those related to Canadian and Mexican imports are set to be paused until March 2025. Although similar measures were first introduced in 2018 during Trump’s first term as President, the 2025 tariffs are anticipated to exert a more substantial impact on the air cargo sector due to their broader scope.
With these stringent tariffs in place, what are the implications for the aviation market, particularly in the air cargo sector and freighters?
When the initial tariffs on steel and aluminium imports were implemented in March 2018, followed by several rounds of tariffs on Chinese goods, air cargo demand began to slow. While full-year air cargo demand growth in 2018 remained positive at 3.5%, it was significantly lower than the 9.0% and 9.8% seen in 2017 and 2016, respectively. In 2019, air cargo demand subsequently declined by 3.9%.
The new tariffs introduced in 2025 include a “de minimis” provision, which applies to packages valued under $800. This provision, previously exempted in 2018, has been extensively utilised by online retail giants from China, such as Shein and Temu, enabling them to offer goods at remarkably low prices and contributing to their growing popularity. In 2023, approximately 30% of U.S. online shoppers reported purchasing items from China. While specific data on the percentage of total imports falling under the de minimis threshold is not readily available, it is estimated that a significant portion of low value e-commerce shipments will be affected by these new tariffs.
The trend of global air cargo supply and demand
Note: CTK: cargo-tonne-kilometre ACTK: available-tonne-kilometre
Source: IATA; Cirium Ascend Consultancy analysis
Despite the decline in air cargo demand in 2019, the global freighter fleet experienced growth. According to Cirium data, the number of widebody and narrowbody freighters in service increased by 4% and 5% respectively in 2019, while their average daily utilisation rose by 2% and 5%. This suggests that the tariffs imposed in 2018 did not significantly hinder freighter operations. In fact, the rising demand for domestic consumption in both China and the U.S. may have positively influenced narrowbody freighters. This trend is evidenced by global capacity (available cargo ton kilometres), which recorded consistent year-on-year monthly increases throughout 2019, culminating in a moderate 2.1% rise for the full year.
However, the combination of declining demand and increasing supply resulted in a 2.6% decrease in load factor, negatively impacting the profitability of freighter operators, particularly in less efficient international operations. The data indicates that the tariffs enacted in 2018 introduced some challenges, underscoring the complex dynamics of the global trade environment, but there were not insurmountable.
The fleet of narrowbody and widebody freighters
Source: Cirium Core
The effectiveness of the new tariffs in significantly reducing the US deficit and improving economic conditions remains uncertain. However, one certainty is that air cargo demand may be expected to decline. The extent of this decline will depend on the scope and coverage of the tariffs. Despite the potential short-term turbulence in specific markets, such as China and the US, demand for freighters seems unlikely to be significantly affected. Air cargo demand is projected to continue growing in the long term. However, small widebody freighter operators with a focus on the China-US market may face challenges if the tariffs are prolonged. These operators, with their smaller fleet sizes, might struggle financially under extended tariff implementations.
Many questions remain as a consequence of early policy initiatives from the new US administration, but it is clear that the aviation market will need to closely monitor developments and adapt accordingly to maintain efficiency and competitiveness in a rapidly evolving geo-political environment.
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