China’s Air Cargo Exodus Floods the US Ahead of Holiday Uncertainty
Air freight shipments from China to the U.S. are continuing to ramp up as demand for goods out of e-commerce players like Shein and Temu accelerates ahead of the holiday season.
Plenty of geopolitical uncertainty has contributed to the rush to air more product out of China—with issue No. 1 being the looming inauguration of President-elect Donald Trump.
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Trump’s second go as president is expected to come with more Section 301 tariffs on Chinese goods that could tack on anywhere from 60 percent to 100 percent duties—spooking uncertain U.S. importers.
And before a new administration enters the White House, the Biden administration is likely to establish new a plan to curb de minimis package volumes entering the U.S. Any significant regulation could potentially halt companies like Shein and Temu from shipping certain goods, especially if they don’t comply with certain forced labor provisions. Those two companies have capitalized on the opportunity to ship any package that hosts less than $800 worth of goods duty-free.
Even if a plan does not get put in place before the presidential transition, the pushback against the de minimis “loophole” has seen bipartisan support in Congress, making a proposal more likely to get pushed ahead by Trump.
Across all transportation categories, outbound shipments out of China rose 12.7 percent from a year earlier in October. The percentage is up sharply from the 2.4 percent increase in September, according to China’s General Administration of Customs. The October total also topped the 4.9 percent growth expected by economists in a Wall Street Journal survey.
Global logistics giants have prepared for the exodus out of China. In September, DHL said it would invest $105 million to deploy eight new Boeing 777 cargo aircraft, with the company saying it expects a “a high-level volume increase in particular on the China outbound lane to the rest of the world during the upcoming peak season.”
The company also recently implemented demand surcharges, namely due to the expected crunch in air cargo exiting the country.
UPS, which operates more than 360 flights daily, said in October that it was adding 200 flights from Asia to Europe and the U.S. during the fourth quarter, as it anticipated a surge in volume demand for the peak season.
Additionally, European freight forwarding goliath DSV debuted a weekly charter service on Sept. 3 that travels between Singapore and Los Angeles, saying “airlines are expected to reallocate capacity from America and Europe to Asia to capitalize on higher profits in Asia.”
As the near-term air cargo demand out of China escalates, freight rates for flying goods from Asia to the U.S. have surged substantially. The average spot price in October up 49 percent from a year ago to $5.46 per kg, according to air freight and ocean freight benchmarking firm Xeneta. During the same period, Asia-to-Europe rates rose 25 percent.
The disparity is seen in another major benchmark, the Freightos Air Index. According to Judah Levine, head of research at Freightos, China to-North America rates have hovered around $7.00 per kg—a high for the year—since late October, for a 17 percent increase from the e-commerce volume-driven $6.00 per kg baseline that has ben held for much of the year. And at nearly $4.00 per kg, China to Europe rates are just 6 percent higher than a month ago.
Some activity out at sea over the summer could further give insight into what to expect out of imports out of China for the winter.
During the summer, a flurry of goods had been transported of China as more companies pulled forward their goods ahead of a potential port strike on the East and Gulf Coasts, as well as new China-targeted tariffs implemented by the Biden administration.
Those tariffs, which went into effect on Sept. 27, were levied on goods including electric vehicles, semiconductors, lithium-ion batteries, aluminum, steel and ship-to-shore cranes.
According to data from supply chain visibility platform Project44, imports from China into the U.S. through the June-to-October period increased 6 percent from the year prior. In that same period, imports out of Vietnam decreased 4 percent.
“This decrease does not necessarily indicate reduced imports from Vietnam; it is likely offset by increased post-peak imports from China pulled forward due to the tariffs,” according to Project44.
As more air cargo is expected to fly out of China, U.S. and European airlines are reportedly calling for sanctions on Russian airspace to be lifted. Sanctions from the U.S. and certain E.U. nations were imposed against Russia when the country invaded Ukraine in 2022.
According to supply chain publication The Loadstar, the airlines feel the ability to fly through the airspace gives Chinese carriers an unfair advantage when they travel to certain markets. In one example, United Cargo president Jan Krems told the publication that his airline cannot fly directly from the U.S. to India anymore because they cannot go over Russian airspace.
Krems said Chinese airlines destined for the U.S. will fly west over Russia, but American carriers flying east have to maneuver around the country’s borders to get to China.
Additionally, Chinese carriers gain benefits that come with shorter routes, namely lower fuel and labor costs, as well as turnaround time advantages.
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