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Air Cargo Rates Set to Sink as De Minimis Gets the Axe
Glenn Taylor
6 min read
Expect the cost to ship cargo via air freight to nosedive in 2025—while more available cargo capacity is freed up—amid the Trump administration’s abrupt exclusion of the duty-free de minimis exemption.
The elimination of the de minimis trade provision, which allowed packages to enter the U.S. tax-free if the value of the shipment was lower than $800, is disproportionally set to upend the air cargo market, particularly for e-commerce orders flowing from China into the U.S.
With the rapid growth of e-commerce giants like China-founded Shein and Temu, both of which flooded air cargo capacity throughout 2024, airborne cargo has delivered the lion’s share of packages that would qualify for de minimis.
“It’s definitely going to change the calculus. I don’t know if it will mean that all e-commerce shipments disappear from air cargo, but it’s safe to say that a lot of it will shift rapidly,” said Judah Levine, head of research at freight booking marketplace Freightos. “A lot of capacity is going to open up on this lane.”
Of the 4 million daily shipments processed by U.S. Customs & Border Protection (CBP) in 2024, 88 percent arrived through international mail; express courier services such as UPS, DHL and FedEx; or on commercial airline flights.
Shein and Temu have led the charge here as they leveraged de minimis to ship low-value parcel shipments directly to U.S. consumers.
The two companies, both of which still have much of their supply chains rooted in China, are responsible for an estimated 30 percent of packages shipped daily into the U.S., according to a 2023 report released by The U.S. House Select Committee on the Chinese Communist Party.
Before e-commerce orders began flooding the air cargo market in late 2023, China-to-North America air freight rates ranged between $3.50/kg and $3.80/kg, according to Levine. That figure, according to Tuesday’s most recent Freightos Air Index, has since popped up to $5.09/kg as demand and capacity both accelerated to record highs in 2024. But that number has already dipped 9 percent from the week prior amid factory closures for Lunar New Year, and is expected to keep dropping.
The increase in air cargo capacity over the past few years could bring rates back down even lower than the late 2023 figures if e-commerce players cannot ship their goods duty-free into the U.S., Levine said. Capacity soared 25 percent out of China in 2024, according to the Civil Aviation Administration of China.
“In 2023, there was still a deficit of capacity in the market, because the industry was recovering from the pandemic,” Levine told Sourcing Journal. “This also releases a lot of capacity back into the market overall, so you might see rates on other lanes also decrease as supply increases across the whole industry. Once that capacity goes back, rates start to fall, so you might see that across the board.”
Further helping the rates fall will be a short-term decrease in demand, said Thomas Kempf, senior director of global air freight development at Flexport. While air cargo demand shot up 11.3 percent from the year prior in 2024, according to the International Air Transport Association (IATA), that figure is expected to decelerate to a more moderate 5.8 percent figure in 2025.
“A softening of demand is evident for small parcel air cargo from China to the U.S. Some shippers may reduce their volumes or even shift to alternative distribution models,” such as a focus on sea-to-air services, Kempf told Sourcing Journal. “That of course would create a downward pressure on rates in the short term. We’re seeing that already.”
The medium term will likely hinge on whether the e-commerce brands decide to ship air freight in bulk, rather than via direct-to-consumer parcels. The ability for businesses to handle this change could determine the direction of rates, he said.
“This could stabilize demand. However, it’s always an ‘if’ right?” said Kempf. “Overall demand, of course, may also decline as those costs increase. For some players, these costs will be too much, and that will potentially push rates downward in the first half of 2025.”
For the long term, Kempf said to keep an eye out for continued sourcing shifts, which are already leading to new trade routes, which foster new pockets of air freight demand. However, if volumes decline, carriers could reduce their capacity allocations for e-commerce-heavy air routes, which would push rates back up again.
The closure is going to force e-commerce players, whether it be Shein, Temu or Alibaba, or even U.S.-based online sellers that may be over-reliant on the de minimis clearance, to rethink their logistics positioning at different ends of the supply chain.
“They will consolidate some more of their shipments, or they could also increase their warehouse footprint in the U.S., or shift to alternative fulfillment methods. This is most likely what’s going to happen,” said Kempf. “That will create some jobs as well in the U.S. This is exactly what [the administration] wants to achieve.”
Levine also noted that there has already been a significant increase in ocean freight out of China to Mexico over the past few years, and that many Chinese companies, including Shein and Temu, have built up and partnered with third-party logistics (3PL) providers to build out fulfillment capabilities in the U.S. Temu has already reacted to Trump’s China tariffs by primarily showcasing U.S.-stored goods on its e-commerce marketplace.
Of course, all these suggestions amount to a more expensive supply chain that the e-commerce players had initially sought to avoid—prompting the heavy focus on air cargo in the first place.
“Not that they are completely reliant on this, but part of that strategy was to have lower costs. You have a slightly higher air cargo cost, but you have lower costs,” Levine said. “You didn’t have to build up any of those kinds of capabilities in the U.S. That was part of the cost advantage for those platforms, and that piece will change.”
E.U. air freight rates still rising amid Trump tariff threats
While air freight rates are forecast to slide further amid the closure of the de minimis “loophole,” as its detractors in U.S. Congress often describe it, the concerns growing in Europe that President Trump will levy tariffs throughout the E.U. are currently seeing the inverse.
“You can see on the trans-Atlantic westbound, particularly, the rates have increased quite strongly in recent weeks,” said Kempf. “That’s most likely to do with front-loading activities of shippers, which makes sense. There’s still some time now to get some goods into United States before anything will be announced.”
As of Tuesday, the Freightos Air Index said that average weekly prices increased 5 percent to $2.35/kg on Northern Europe to North America routes. Since Jan. 14, rates on that trade lane have increased 11 percent.
