AIR CARG O WEEK


MARKET FORECAST


COMMENT: WHAT DOES JANUARY 20 HOLD FOR AIRFREIGHT?


IF DONALD TRUMP’S PROPOSED TARIFFS ON IMPORTS FROM MEXICO, CANADA, AND CHINA ARE IMPLEMENTED, AIRFREIGHT IS LIKELY TO EXPERIENCE SEVERAL SIGNIFICANT IMPACTS


F


ormer president Donald Trump has announced plans to impose sweeping tariffs on imports from Mexico, Canada, and China as one of his first actions upon returning to office. This proposal, shared on his Truth Social platform, includes a 25% tariff on all goods


imported from Canada and Mexico and an additional 10% tariff on products from China. These measures, if enacted, are likely to impact prices for American consumers on essential items such as fuel, vehicles, and agricultural products. There are media comments that president-elect Trump has


misunderstood the fiscal source of tariff payments, being under the misapprehension that it is foreign governments who pay the tariff costs, essentially subsidising imported goods. In truth, it is the importer who pays and is likely to pass on the costs to the customer.


Tariff overview and historical context Tariffs, a form of customs duty applied to imported and exported goods, have historically been a significant source of government revenue. While their fiscal role has diminished in developed countries, tariffs now primarily serve to protect domestic industries or as tools in trade negotiations and disputes. The authority to set US tariffs is constitutionally vested in the


US Congress, though this power has been partially delegated to the President. Additionally, the United States operates within a rules-based global trade system established after World War II, initially under the General Agreement on Tariffs and Trade (GATT) and later as part of the World Trade Organization (WTO). These agreements aim to reduce trade barriers and promote stable trade relations among nations.


Economic hit? As the largest global


importer, the United States sources


substantial goods from its top suppliers: Mexico, Canada, and China. In 2023, 83% of Mexican exports and 75% of Canadian exports were destined for the US. In 2022, 5% of freight between Canada and the United States was transported by air, while 55% was transported by trucks, 18% by pipelines, 16% by


4


rail and 6% by vessel. If enacted, the proposed tariffs could disrupt these relationships,


economic leading to increased costs for


American consumers and potentially prompting retaliatory trade measures.


Statements from Donald Trump In his announcement, Trump framed the tariff plan as part of broader efforts to address trade imbalances and immigration concerns. “On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% tariff on ALL products coming into the United States, and its ridiculous Open Borders,” he stated. This move signals a return to his earlier focus on renegotiating relationships


trade and prioritising American economic


interests, potentially creating ripples across global markets and trade partnerships.


Consequences The proposed tariffs could reduce airfreight volumes from Mexico, Canada and China by increasing costs, disrupting supply chains and encouraging trade diversion. However, high-value and time-sensitive goods may continue to rely on airfreight, albeit at a premium. Longer-term impacts will depend on the extent of tariff implementation, retaliatory measures and adjustments by businesses to the new trade environment. Tariffs would increase the landed cost of goods, making shipments more


airfreight expensive for businesses and


consumers. Airfreight often handles premium products such as electronics, pharmaceuticals, and perishable goods, which already carry high transport costs. The additional tariffs may lead to higher prices for imported goods in these categories. As well, there may be a reduction in the volume of goods transported by


airfreight as businesses seek alternative


transport modes or sources to mitigate costs. Businesses may relocate manufacturing to avoid tariffs,


which could reduce airfreight demand from Mexico, Canada and China. Companies might source more goods domestically in the


US or from countries unaffected by


the tariffs, diverting


airfreight traffic to alternative trade routes. If Mexico, Canada, or China retaliatory


impose further as tariffs,


airfreight demand could decrease


global


trade slows. Retaliation might also incentivise businesses to reduce reliance on US markets, affecting inbound and outbound airfreight flows. Tariff implementation typically stricter For


requires enforcement.


customs airfreight


shipments, which rely on speed, this could result in delays at entry points as customs authorities verify tariff compliance. Additional documentation and administrative burdens for airfreight carriers and shippers, further raising operational costs. On the flip side, businesses importing critical no US domestic


goods with requiring rapid delivery, such


substitutes may


continue to rely on airfreight despite higher costs. Industries


as medical


supplies, may also continue to use airfreight even with tariff- imposed price increases.


Troubles in the 21st century No-one can argue that the last few years have been anything other than a nightmare for airfreight operations. From 9/11 to Icelandic volcanoes and super tightened security regimes, the industry faced the Covid crisis which was then followed by war in Europe and the Middle East. Now, the industry must prepare for the economic and business shocks that may come from tariff wars in 2025.


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