Reciprocal tariffs cause uncertainty and demand shifts
Asia
U.S. reciprocal tariffs have caused uncertainty. Despite some pre-buying of goods ahead of tariff-related price hikes, overall consumer demand is expected to go down. While tariffs on goods from most countries except China have been lowered to 10% during negotiations, the impact on air freight demand from China and Southeast Asia (SEA) to the United States is considerable. This is despite exemptions for certain electronic goods exported from China.
Demand from China to the United States has dropped significantly, while demand from Southeast Asia has risen sharply as suppliers rush to export cargo before the current reciprocal tariff rates expire July 9, 2025. The end of duty-free de minimis shipping on May 2, 2025, is expected to further soften demand from China to the United States.
Consequently, carriers are expected to adjust their capacity, diverting away from China towards Southeast Asia. Rates for China are expected to remain soft, while rates for Southeast Asia will rise steadily toward the end of May. These forecasts are subject to change with the evolving political and macroeconomic landscape.
North America
On the Trans-Atlantic market, passenger flights have been added to support higher travel demand at this time of year, adding to belly capacity for cargo. While global economic uncertainty could impact global travel, for the moment airlines are proceeding with their usual capacity additions. If travel demand is sluggish later in the summer season, airlines may re-evaluate their aircraft positioning.
On the Trans-Pacific market, significant flight cancellations are occurring. These are tied to a sharp decrease in demand for air freight out of China. Airlines are evaluating their schedules on a week-to-week basis and the end of duty-free de minimis shipping for shipments from China and Hong Kong may lead to more cancellations. Demand for cargo shipping to China has similarly decreased. However, there may be instances where capacity is tight on direct flights to China.
Oceania
The capacity for travel to and from the Oceania region remains stable. The beginning of April showed a softer performance in general market conditions. This is typical in the lead-up before the Australian general election. Rate levels are consistent, with capacity effectively meeting demand, resulting in smooth operations across all stations.