April 2, 2025 marked a sharp turn in history, as US President Donald Trump declared “Liberation Day” —a bold proclamation accompanying an
even bolder move. Under Executive Order 14257 and leveraging the International Emergency Economic Powers Act (IEEPA), the administration launched a sweeping tariff regime aimed at reshaping the country’s import landscape and reducing its massive trade deficit. The center piece of this strategy is a 10% baseline tariff on all imports, which took effect on April 5, alongside aggressive “reciprocal tariffs” targeting
around 90 countries calculated using a formula that ties levies to the U.S. trade deficit with each nation. While these reciprocal tariffs are currently
paused for most countries until July, China is already facing a staggering 145% duty. From the 25% auto tariffs to the elimination of the $800 de minimis exemption for Chinese e-commerce—effective May 2—the ripple effects are poised to disrupt everything from supply
chains to consumer prices. Only a handful of sectors and partners, like pharmaceuticals, semiconductors, and USMCA allies Canada and Mexico, escaped unscathed. This one declaration has shifted the rules of global trade overnight. And for Air Cargo—an industry that thrives on speed, reliability, and cross-border fluidity, the runway ahead suddenly looked a lot more uncertain.

Air Cargo: The Barometer Air freight doesn’t just move goods—it moves urgency. It’s the express lane of global trade, built for speed, high value, and precision. So, when the 2025 tariffs were announced, the sector reacted instantly. Routes were redrawn, schedules scrambled, and calls from anxious clients surged.

Why such turbulence?
Because although air cargo carries just 1% of global trade by volume, it moves 40% by value products like electronics, medical devices, automotive components, and luxury fashion. These are high-stakes, time-sensitive shipments where even minor delays carry major costs. “The air cargo sector is especially responsive to trade policy disruptions because of its unique role in handling high-value, time-sensitive goods,” says CK Govil, President of ACAAI.
“Even a slight increase in tariffs can significantly impact the economics of air shipping, leading to diversion of trade flows, mode shifts, and
volume drops.”

The removal of the $800 de minimis exemption on May 2 added further stress. Platforms like Shein and Temu had leaned heavily on-air cargo to deliver low-value goods quickly to U.S. homes. With that loophole gone, express parcel volumes are already shrinking.
“These products are often integral to global supply chains, where even brief delays can have cascading effects on production and delivery schedules,” explains a senior air cargo expert adding, “Trump’s tariffs created sudden shifts in trade flows, prompting last-minute shipments or sourcing changes. Air freight became the go-to mode for urgent adjustments.”

With its 1–5-day transit windows, air cargo effectively serves as a real-time trade barometer. As tariffs hit, shippers frontloaded inventory
or rerouted goods to friendlier ports to dodge extra costs. “Air cargo has shorter lead times—often under 48 hours—compared to ocean freight, which
can take weeks,” CK Govil adds. “This gives shippers the agility to respond instantly to
policy changes. Ocean freight cannot respond as nimbly.”

But the aftershocks haven’t stopped at the U.S. borders. China’s 125% counter-tariff, the EU’s 20% levy, and curbs on rare earth exports have disrupted post-pandemic recovery flows. “Sadly, the application of tariffs and other trade restrictive measures impacts the entire global
world of supply chains and transport modes,” reflects Glyn Hughes, Director General of TIACA. “Since air cargo handles higher-value, often
discretionary goods, demand dips as consumer spending tightens, he added.

In today’s volatile trade climate, air cargo isn’t just reacting—it’s signaling. It remains the clearest barometer of how policy changes ripple
through the global economy. Air Cargo Rearranged The 2025 tariff shocks didn’t just shake global trade—they reprogrammed air cargo itself. From surging demand and volatile rates to rerouted lanes and rising strategic costs, the aftermath shows how geopolitics can reshape prices,
priorities, and flight paths almost overnight.

Frontloading Frenzy, Followed by a Demand Dip Ahead of April’s tariff rollout, shippers rushed to beat the deadline. High-value goods like smartphones, laptops, and pharmaceuticals were frontloaded into Q1, pushing air cargo demand sky-high. Trans-Pacific volumes rose
12% YoY in March, with IATA reporting a global 10% Q1 surge—led by Asia-Pacific.
But once tariffs kicked in especially the May 2 removal of the $800 de minimis exemption— demand nosedived. U.S. Census data shows a 64% drop in imports from China and a 36% fall in exports by mid-April. Trans-Pacific air cargo volumes dropped 15% month-over-month.

E-commerce took a hit: shipments fell 30% as platforms like Shein and Temu pivoted to ocean freight. “Tariff and trade policies seem to change daily. With de minimis rules coming into effect from May 2, e-commerce demand is bound to suffer,” said
Glyn Hughes. “We’re seeing pre-implementation boosts as shippers race the clock.” Rate Volatility Mirrors Volume Swings Rates followed suit. In March, spot rates on the trans-Pacific jumped 15–20%, reaching $5.50/kg (up from $4.50 in January). But as volumes collapsed post-tariff, rates retreated to $4.80/
kg—still elevated, but down from the March peak. Intra-Asia lanes corrected ~5% as shippers rerouted via Hong Kong and Singapore.

China’s retaliatory tariffs 125% on key categories plus rare earth restrictions—drove costs higher. Sourcing shifted to Taiwan and South Korea,
pushing air freight rates there to $6/kg (a 20% rise). Strategic Costs and Shifting Baselines
“Fuel is no longer cyclical—it’s strategic,” said CK Govil. “Jet fuel prices remain volatile due to geopolitics, OPEC+ controls, and SAF adoption. Carriers now bake in higher fuel baselines into contracts and surcharges.” Other friction points mentioned by him:

• Tariffs & Export Controls: Now part of the
playbook, not one-offs.
• Customs: Clearance is evolving into a
competitive edge—especially for pharma
and e-commerce.
• Sustainability: ESG-linked costs like SAF,
emissions tracking, and carbon offsets are
non-negotiable.

Add airport labor shortages, handling fee hikes, and green surcharges—today’s air cargo runs on a whole new cost structure, CK Govil highlighted. Global Ripples and New Rate Realities The impact extended well beyond Asia. Europe’s 20% retaliatory tariffs pushed U.S.-EU air freight
rates up 10%, straining pharma and luxury exports. Lufthansa Cargo saw a 5% dip in volumes
as cost-sensitive shipments pulled back. In Africa, a 47% tariff on countries like Madagascar led to a 20% drop in textile air cargo—deepening
economic pain. Meanwhile, rare earth shortages drove up costs for high-tech cargo. Semiconductor air shipments from Taiwan and South Korea rose 12% in April, but tariffs and sourcing premiums raised overall costs by 20%. Supply Chain Realignment The April 9 “pause” on non-China reciprocal tariffs brought momentary relief. Demand growth cooled from 10% in Q1 to 5% in April—but uncertainty remained. A new 10% baseline tariff on goods like apparel and electronics added $0.10–$0.20/kg to freight costs.

Long-term contracts faded. Spot bookings jumped 30% as shippers sought tactical flexibility. ASHISH ASAF
MD & CEO S.A. Consultants & Forwarders Pvt. Ltd. “The cargo load factor may be high
in certain unexpected segments visà-vis traditional routes or segments. The increase could also mean higher yields to carriers for these new demand routes, where the capacity
cannot be enhanced abruptly, which could result in higher freight costs for certain trade lanes with lesser cargo capacity.” SPECIAL FEATURE AIR FREIGHT TARIFF
www.logisticsinsider.in 15
“Every policy tweak drives up cost,” Glyn Hughes said. “With blanket 20% tariffs on the EU and countermeasures in return, demand on those lanes is bound to dip.” Sourcing shifted. “Companies doubled down on China+1 strategy—looking to Vietnam, Mexico, and India. The change is reshaping global carrier networks, said the senior air cargo expert quoted earlier, pushing airlines to invest
in flexible networks and expand capacity in new
markets. However, Glyn Hughes sceptic about the
shift says, “With many of these countries also under scrutiny for U.S. tariffs, we don’t expect
significant U.S.-bound growth from them either. That capacity will need redeployment.” Winners, Workarounds, and Watchpoints
• Vietnam–U.S. air cargo rose 10%, led by
electronics.
• India in Q1 2025 saw a 15% jump, driven by
iPhones and pharma.
• Mexico, riding USMCA benefits, posted an
8% rise in auto parts and electronics freight.

Some Chinese exporters tried to bypass scrutiny by routing via Hong Kong and Singapore, lifting intra-Asia air cargo 7%. But it backfired—U.S.
customs delays added 1–2 days and increased inspection costs.
Despite diverging views on traffic realignment, both Hughes and the senior expert agree future planning must be flexible and forward-looking.
“The challenge now,” said Glyn Hughes, “is maintaining load factors and yields amid falling
demand.” “Carriers must pivot to resilient logistics solutions
and build presence in new growth hubs,” the senior air cargo expert added. India’s Moment—But Is It Ready to Take Off? While the realignment of air cargo traffic to newer markets at a larger scale is somewhat debatable—if experts are to be believed. The
gaining volumes do suggest an initial turn of global attention towards India. India’s 27% tariff (temporarily 10% during the 90-day pause) was significantly lower than China’s 145%, Vietnam’s 46%, and Thailand’s 37%. This made Indian goods more cost-competitive for U.S. importers, encouraging a shift in supply chains away from higher-tariffed countries. But tapping this moment requires more than demand. “To capitalize on the trade shifts triggered by Trump’s tariffs—especially the U.S.-China trade tensions—India must enhance its policy environment, infrastructure, and global competitiveness,” said the senior air cargo expert.

1. Policy: From Blueprint to Execution India’s policy architecture around air cargo remains fragmented. While the National Air Cargo Policy Outline (2019) offered direction, its real-world execution has stalled. “The policy now needs to be updated and implemented with actionable milestones,” said CK Govil. “This should cover multimodal connectivity, cargo village development, and logistics parks near airports.”

Key action points include:
• Digitizing customs processes across all major airports through platforms like SWIFT
and ICEDASH.
• Implementing 24×7 customs clearance nationwide.
• Introducing tax incentives for air cargo users and rationalizing ATF pricing to improve cost competitiveness.

Air cargo must also be positioned as a strategic enabler within free trade agreements, ensuring logistics efficiency is prioritized alongside tariff structures.

2. Infrastructure: Build the Backbone While India boasts a strong passenger aviation
network, its air cargo infrastructure is still underpowered—especially when benchmarked against Asian hubs like Singapore, Seoul, or Hong Kong. “India must invest in modern ports, efficient logistics corridors, and a reliable power supply to match global standards,” noted the senior air cargo expert. “Enhancing air cargo capacity, customs clearance speed, and cold chain logistics will support high-value exports.”

According to CK Govil, India must:
• Upgrade Tier I and II airports with integrated cargo terminals, automated handling, temperature-controlled storage, and EDI systems.
• Develop air freight stations (AFS) to decongest busy gateways and push cargo handling deeper into the hinterlands.
• Strengthen cold chain and pharma logistics, especially for GDP-compliant exports in pharmaceuticals, perishables, and electronics. In parallel, the connectivity gap between air terminals and industrial/export zones must be addressed through dedicated multimodal corridors, linking production clusters directly to airports via road and rail.

3. Competitiveness: Unlock India’s Export Muscle Even with strong demand signals in sectors like pharma, electronics, and textiles, India’s logistics cost stack often undercuts its export advantage. “India needs to improve labor productivity, upskill its workforce, and foster innovation,” the senior expert emphasized. “Strengthening IP protection and signing strategic trade agreements will boost investor confidence.” CK Govil adds that workforce development is key:
• Launch logistics-specific skilling programs via NSDC to create a tech-savvy cargo workforce.
• Promote AI, automation, and analytics in cargo handling and route planning.
• Encourage private investments in air cargo infrastructure through PPPs, ensuring early involvement of freight forwarders, airlines, and integrators.

India must also accelerate digital transformation in air logistics by scaling the National Logistics Portal (Air Cargo) and embracing technologies
like blockchain, IoT, and AI to improve traceability CK GOVIL President ACAAI “The air cargo sector acts as a barometer for trade policy changes due to its flexibility, speed, and focus on sensitive goods. Trump’s tariffs amplified these traits, causing visible surges and drops in air freight rates and volumes globally— and in agile markets like India, which capitalized on the shift in trade flows faster than ocean freight could.”

SPECIAL FEATURE AIR FREIGHT TARIFF
www.logisticsinsider.in 17 and operational transparency. India has made significant strides, but this is a moment that demands urgency and coherence. The world’s air cargo lanes are being redrawn and India can emerge not just as an alternate origin, but as a preferred global hub. “By aligning reforms with global supply chain demands, India can position itself as a viable manufacturing and export hub amid global realignments triggered by trade policy
disruptions,” the senior air cargo expert affirmed. “With the right mix of policy boldness, infrastructure modernization, and digital-first
thinking,” CK Govil added, “India can transform into a preferred global air cargo hub, especially as global trade routes evolve amid geopolitical
shifts.” Outlook The current surge in air cargo costs—driven by fuel volatility, geopolitical unrest, regulatory shifts, and sustainability mandates—is fast
becoming the new operational norm. As CK Govil notes, many of these cost drivers are now structurally embedded. Jet fuel volatility, intensified by OPEC+ constraints and the transition to Sustainable Aviation Fuel, is prompting operators to rethink pricing models. Meanwhile, tariffs and trade restrictions, once seen as temporary, now reflect a broader shift toward protectionism. This has complicated routing and increased costs, especially on high tech and sensitive trade lanes. Customs processes are also evolving from mere formalities to complex compliance hurdles. Frameworks like RCEP and the EU’s Carbon Border Adjustment Mechanism (CBAM) demand greater traceability, while upfront investments in tech and training strain resources. On the ground, rising labor and handling costs—driven by inflation and ESG-linked infrastructure goals—are unlikely to recede. Green surcharges and carbon offset costs are becoming standard, with shippers under growing pressure to decarbonize. Yet, cautious optimism remains. Glyn Hughes believes global growth still hinges on open,
integrated trade. “I hope what we are seeing are short-term shocks. Market forces will hopefully realign on a path of mutual and collective growth.”

Ashish Asaf, Group MD & CEO of S.A. Consultants & Forwarders Pvt. Ltd., echoes this: “Like any disruption, global trade war will create
new trade flows and opportunities. Cargo load factor may rise in unexpected segments, leading to higher yields where capacity is limited. While outcomes are uncertain, the current low oil prices might offer some relief, and we expect tariff tensions to ease eventually.” The air cargo industry is clearly shifting from
a rate-driven model to one built on structural resilience. Success now depends on digitization, agile planning, and smart cost management.
Those who adapt will not only endure but also redefine the future of global trade.

AIR FREIGHT TARIFF SPECIAL FEATURE