The recent suspension of the U.S. “de minimis” tariff exemption for low-value imports from China and Hong Kong has significantly impacted the international air freight industry. This policy change, effective since early May 2025, has led to a nearly 30% drop in air freight capacity between China and the U.S., disrupting a major revenue stream for Asian airlines that heavily relied on e-commerce cargo. Air Cargo News+8Reuters+8Reuters+8
Decline in Air Freight Volumes
The removal of the de minimis exemption has particularly affected e-commerce shipments, which previously accounted for 55% of goods shipped from China to the U.S. by air. Carriers like Cathay Pacific, China Southern, Air China, and Korean Air, which benefited from high-volume shipments from fast fashion retailers such as Shein and Temu, are now facing declining demand. The STAT Trade TimesAir Cargo News+7Reuters+7Reuters+7
The sudden drop in cargo demand for U.S. shipments, coupled with dim prospects for a solid rebound, creates headwinds for airlines in Asia as they grapple with both a fall in passenger air fares and concerns over a global recession. The market remains volatile and thus unpredicatable. Reuters
Adjustments in Airline Strategies
In response to the decreased demand, major freight operators are adjusting their strategies. Cathay Pacific and Singapore Airlines are redeploying freighters to other markets, such as Latin America, to offset the decline in transpacific volumes. Additionally, some airlines are diversifying into sea shipping to adapt to the changing landscape. Reuters+1Reuters+1
Impact on Air Freight Pricing
The reduced demand has led to a surplus in air freight capacity, exerting downward pressure on pricing. Freightos data suggests that transpacific air freight rates, which averaged $5–$7 per kilogram in 2023, could fall by 30% to approximately $3.65/kg—or even lower. Excess capacity, especially as passenger airlines restore operations and increase belly cargo space, could push rates down further. airsupply+1The STAT Trade Times+1
However, if volumes continue to decline, carriers might reduce their capacity allocations for e-commerce-heavy air routes, which could eventually push rates back up. Supply Chain Dive+7lgi.laufer.com+7Reuters+7
Shifts in Supply Chain Strategies
Anticipating stricter de minimis regulations, Chinese retailers have already invested in U.S. warehouses to transition to a B2B2C fulfillment model. This shift means goods will now be pre-imported, taxed, and stored domestically before delivery, streamlining logistics but also raising costs. These increased costs are likely to be passed on to consumers. airsupply+1Reddit+1
Furthermore, companies are exploring alternative routes and manufacturing locations. Some manufacturers are relocating to Southeast Asian countries like Vietnam, Thailand, and Malaysia, which still qualify for de minimis exemptions. However, these countries face new tariff challenges as well. airsupplyReuters
Conclusion
The suspension of the de minimis exemption has introduced significant volatility into the air freight market, leading to decreased volumes and downward pressure on pricing in the short term. Airlines and freight operators are actively adjusting their strategies, including rerouting capacity and diversifying shipping methods, to navigate this challenging environment. As the industry adapts to these changes, stakeholders will need to remain agile and responsive to evolving trade policies and market dynamics.Air Cargo News+1Kerry Logistics Oceania+1
Domestically
Whether these changes have much or any impact on the domestic air freight market remains to be seen when it is dominated by two major suppliers in UPS and FedEx. Capacities remain open and there is no indication that FedEx or UPS plan to relax pricing domestically, indeed prices are actually increasing which we will write about next time.