The U.S. government has set its sights on the “cash cow” of air cargo. The president has signed an executive order that cancels the tax exemption on Chinese e-commerce imports, dealing a heavy blow to the primary driver of air cargo growth in recent years. Similar to the previous imposition of tariffs on all imports from Canada and Mexico, the new administration’s stance on tax exemption has been inconsistent.

As expected, U.S. Customs and Border Protection (CBP) was unprepared to handle the flood of packages for customs clearance, causing cargo to rapidly pile up at major U.S. airports. When the previous U.S. policy was temporarily halted, over one million parcels were stuck at JFK Airport. CBP has been ordered to work with other government agencies to deploy adequate systems to "comprehensively and quickly process and collect customs revenues" and conduct reviews by April 1. Industry experts doubt that CBP can be fully prepared by the deadline, but any delay would only postpone the inevitable outcome.

Although the U.S. government has made it clear that it views tariffs as a bargaining chip in trade negotiations, the e-commerce sector is rife with illegal drugs like fentanyl, contraband, and counterfeit goods. This makes it difficult for Washington to easily change its position on the matter.

Regardless, the “magic bottle” of e-commerce has been opened and can no longer be closed. Trade, like water, always finds a way around obstacles. A trade war may suppress its growth, but it won’t cause it to disappear entirely. The future path of trade remains uncertain, but it’s becoming increasingly clear that continued heavy reliance on air cargo, which consumes a significant amount of shipping capacity, is unlikely.

Some Chinese e-commerce companies have already taken steps to reduce their reliance on direct air shipments to the U.S., which were largely based on the tax exemption policy.

Over the past year, TEMU has gradually shifted more and more products to sea freight to support its growing warehousing network in North America.

 Additionally, TEMU has attracted North American sellers to use its platform. In just a few months, these sellers have accounted for 20% of TEMU’s U.S. sales.

If demand for e-commerce declines, who will fill the gap in air cargo?

Industrial demand, a traditional driver of air freight, was weak last year, with Purchasing Managers' Indexes (PMI) for manufacturing in Europe and the U.S. in contraction, while China’s exports maintained some growth due to concerns over supply chain disruptions and trade conflicts. A trade war is unlikely to trigger a manufacturing boom.

With the continuous evolution of global trade and policy environments, the future of air cargo is full of both challenges and opportunities. How will the shift in e-commerce models and fluctuations in manufacturing demand impact the entire industry? Can new paths be found to continue driving the development of the global logistics network? The future remains uncertain, and all stakeholders are seeking ways to adapt to the new landscape while looking forward to the next growth opportunity.

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Public Account: Cross-border E-commerce Logistics Baixiaosheng