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Tariff hikes s trans-Pacific air freight rates soaring
American Shipper
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Trans-Pacific air cargo rates are up as forwarders report rising interest from shippers spooked by the US-China trade war.
Air cargo rates between Hong Kong and North America spiked this week as the market reacted quickly to a sudden escalation in trade tensions between the US and China.
Forwarders have reported strong interest in air cargo on the trans-Pacific and expect trade flows to shift from China as manufacturers move US-bound production to other Asian countries.
Ben Bidwell, director of US customs for C.H. Robinson, told that due to this new tariff action, “there’s a possibility that even more shippers may look to change their sourcing origin, ultimately resulting in less US freight traffic from China and more from Southeast Asia.”
An Asia-based forwarder said if shippers began to front-load US-bound air cargo, as was the case with containerized ocean freight last fall, he expected “a severe peak” out of Taiwan as electronics manufacturers reroute products through the island factories for assembly or relabeling before onward shipment via Hong Kong or Singapore to the US to avoid tariffs.
Alan Hedge, principal at air cargo analyst Hedge & Associates, said supply chains were already adjusting, “which will simply shuffle existing air cargo traffic from China to other countries, such as Vietnam.”
After postponing the increase to continue negotiations, the US last week raised tariffs from 10 percent to 25 percent on $200 billion in Chinese imports, known as List 3, effective May 10, sparking a rapid response from Beijing, which imposed higher tariffs on $60 billion of its US imports. Tariffs have also been threatened by the US on List 4 items that cover a further $300 billion of Chinese goods. List 4 includes some high-value cargoes generally transported by air, such as cellphones and laptop computers, and shippers could try to stock up on supply by front-loading imports in advance of any expected deadline.
Soaring air freight rate
In the week after the tariff announcement, rising freight rates were accompanied by reports of forwarders “quoting like crazy” for air cargo on the trans-Pacific.
Eytan Buchman, chief marketing officer of the cargo marketplace and rate intelligence platform Freightos, said the tariff announcement left no time for ocean freight to beat the deadline, sing air cargo searches from forwarders up 35 percent.
This was confirmed by Edoardo Podesta, managing director, air and sea logistics Asia Pacific at Dachser Far East, but although he said there was a lot of interest in air cargo, it had not yet translated into a significant rise in shipments.
“I believe there will be a bit more activity in the next two to three weeks until the G-20 Summit (June 28-29 in Osaka) with a gradual but not excessive strengthening of rates,” he told
“After that it should become clearer what is going to happen, and either the renewed interest for air freight will fizzle out again or we will have an artificial peak in summer. If this is going to happen, I expect it to be a strong one because we are now talking of a lot of cargo [that is subject to tariffs], which has real impact on consumers.”
Bidwell also said he has not yet seen a spike in trans-Pacific volume. “Many shippers have simply not had enough time to react to the List 3 increase, let alone look ahead to a potential List 4,” he said.
Sebastiaan Scholte, chairman of The International Air Cargo Association (TIACA) and CEO of Netherlands-based forwarder Jan de Rijk Logistics, agreed there has been little time for shippers to react to the tariffs. But he expressed doubt over whether the demand would continue in what is traditionally a quiet period for air cargo.
“I still think that the market has sufficient capacity and any rise of air cargo due to the tariff situation will most likely be short lived,” he told “In the long term, if the tariffs are going to be raised, you will see that trade and air cargo volume will go down on the trans-Pacific and rates will come under pressure.”
Podesta said front-loading to the US to beat trade tariffs started last year around this time and rates were much higher than usual over the summer of 2018.
“This is definitely not the case now,” he said. “It is still a mixed bag, and as of this week, volume and rates are still relatively low compared to last year and in the last two weeks rates have not moved much.”
Macroeconomic effects
Meanwhile, fears are also mounting over the impact US tariffs and the retaliation by China will have on the global economy. Andrew Herdman, director general of the Association of Asia Pacific Airlines, was concerned about the macroeconomic effects of the trade war and how that might impact carrier members.
“The weak sentiment surrounding air cargo markets is a warning signal that trade disputes are doing real damage to the economy and could further undermine global growth prospects going forward,” he said.
IHS Markit chief economist Nariman Behravesh put a number on the expected impact. “We estimate that the impact of the announced tariffs by the US and China will cut global growth by 0.2 to 0.3 percentage points. If the threatened tariffs [of 25 percent on an additional $300 billion in Chinese imports] are also implemented, then these estimates would be doubled.”

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