The diplomatic relationship between the USA and China is regarded as the most important diplomatic relationship of the 21st century. For obvious reasons. They are the two largest economic superpowers by some distance, and share over 43% of global GDP between them.
How their relationship is managed over the coming years will have extensive implications for international logistics and the global economy. Several events over recent years are having a profound impact on the air freight sector, which is what we will explore in this article.
The USA-China trade war began in 2018
The direct threat to trade has its roots in July 2018, when both China and the US began implementing tariffs on hundreds of billions worth of each other’s goods. Between July 2018 and September 2019, the percentage of Chinese goods subject to tariffs on entry to the US market rose from 0.8% to 66.4%.
Tariffs that remain in 2024, with suggestions they will be added to.
The consequences here are a reduction in trade volumes, which have been realised. In 2023, trade between the two nations was 12.7% down on the 2018 level.
In theory, this presents a good opportunity for shippers using the air freight sector, as lower demand means space for freight is more readily available, particularly for those in Europe trading with the US.
However, a reduction in overall trade volumes has been overshadowed by a recent surge in ecommerce traffic for the air freight sector.
Ecommerce imports to the US from China are driving up air freight demand and rates
Ecommerce goods from the likes of Shein and Temu have been massively adversely impacting the air freight sector for the last 12-18 months, something all aviation shippers need to be aware of.
De minimis rules in the US mean shipments of up to $800 in value can be imported tariff free. The growth of these platforms has resulted in an increase of packages fitting this criteria from 140 million a year to more than a billion in just 12 months.
This is placing extreme pressure on the air freight industry. Total demand, measured in cargo tonne-kilometers, rose by 13.6% in July 2024 compared with 2023 levels. Capacity is very tight, with a large amount of space already reserved in the build-up to Christmas. Our article here explains how air freight shippers can adapt to the growth of e-commerce.
As a result of this ecommerce surge, US Customs and Border Protection (CBP) announced a clampdown. In May 2024, US officials placed greater scrutiny on goods falling under the de minimis threshold, by sending many of them to customs warehouses for inspection.
As part of the measures, Seko Logistics was suspended from participation in the US’ Entry Type 86 program (the name for goods falling under the threshold) for 90 days. Such a move has adverse impacts for regular air freight shippers, who can get caught up in this increased scrutiny.
Additionally, the US implemented emergency measures at the end of August, requiring foreign airlines to submit additional shipper information. News which wasn’t welcomed by the industry.
So far however, increased scrutiny does not look to have deterred ecommerce giants on China export routes, and demand remains above average heading into peak season. Regular air freight shippers therefore, have not enjoyed the benefits of decreased demand and rates, which many suspected would come with the increased customs checks.
In fact, all the indicators are that air freight shippers should prepare for one of the biggest peak seasons on record.
Therefore, US Customs and Border Protection are implementing further measures to get a hold of this ecommerce traffic, according to reports.
“The drastic increase in de minimis shipments has made it increasingly difficult to target and block illegal or unsafe shipments coming into the U.S.”
Daleep Singh, deputy national security advisor for international economics
The new proposals are that the overseas shipments of products subject to US-China tariffs are barred from being eligible for the de minimis customs exemption. Suggestions are the rule will take between only 60 and 120 days to implement.
But more significantly than that, the move suggests that US officials will not stop until they have curbed the ecommerce domination.
This has the potential to be good news for regular air freight shippers. As mentioned, ecommerce's dominance is resulting in higher demand, rates, and space utilisation than in normal circumstances, to the detriment of those reliant on the air freight sector for the transport of high-value or perishable items.
A US crackdown on air freight shipments not subject to import duties could be welcome.
However, there are concerns these moves only suggest further deterioration in the relationship between the US and China.
As the saying goes, ‘if the US economy sneezes the world catches cold’. Well, the same is true of China. The continued success of both is vital for the world economy.
For air freight shippers, the ideal scenario here would be a clamping down on ecommerce traffic which tempers demand, but doesn’t go as far as damaging US-China trading relations further.
What happens to those relations depends to a certain extent on the outcome of the US election, and how the incoming administration, whether Harris or Trump, decides to act.
"Despite tough talk from the US, neither the US or Chinese government want a deterioration of relations. But they both know they're in fierce competition with each other, which is leading to protectionist measures as we have seen with the trade war.
For the time being, shippers need to just be mindful of these factors and how they can influence global commerce, putting contingency plans in place if they deem necessary."
Liam Launders, Head of Sales, WTA
For expert guidance on your air freight shipments and global trade insights, contact the WTA team today.
