The air cargo industry is facing the prospect of weaker demand on services to the US after the country announced a series of tariffs that are likely to impact import volumes.

US president Donald Trump has set the stage for economic conflict by implementing a 25% additional tariff on all imports from Canada, plus a 10% additional tariff on imports from China. Trump also announced an additional 25% tariff on Mexico, although this measure has now been delayed by one month.

When Trump implemented tariffs on Chinese goods in 2018 and later Europe, it caused a rush of air cargo ahead of their implementation before contributing to a quiet year for air cargo demand in 2019.

Trump implemented the tariffs under the International Emergency Economic Powers Act (IEEPA) as a measure to tackle the "extraordinary threat posed by illegal aliens and drugs” and illegal immigration, according to a press release from The White House.

"President Trump is taking bold action to hold Mexico, Canada, and China accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country,” said The White House.

The tariffs on Mexico and Canada will be in effect from 4 February. Commenting on the duration of the tariffs for Mexico and Canada, The White House said they ”will remain in effect” until the US government deems the drugs and illegal immigration issues to be resolved.

There are no details available so far on how long China’s tariff will stay in place, but, taking into consideration the length of the previous US-China trade war, there are few indications the countries will have a quick resolution of issues.

The Executive Order also includes a retaliation clause with the possibility of more severe duties if the countries retaliate. In fact, the Canadian government has already announced that effective 4 February, it will impose 25% tariffs on C$30bn in goods imported from the US.

China is also expected to retaliate in some form.

Further, Trump has also said that tariffs will also be applied to imports from the European Union, but hasn’t yet specified how severe these might be or when they might be introduced.

In response to a question from the BBC on the likelihood of tariffs on the UK, Trump said: "It might happen with that, but it will definitely happen with the European Union."

He did, however, add that "UK is out of line. But I'm sure that one, I think that one, can be worked out..."

At a press conference on 21 January, Trump said the EU was under consideration for tariffs to address a trade imbalance. "They are going to be in for tariffs. It’s the only way you are going to get back fairness,” he said.

Logistics firm Aramex recently warned UK exporters that they could face extra supply chain costs and shipment delays if the US opts to add tariffs on products being sold from the country.

Increased costs as a result of the tariffs may see shippers shift their supply chains. Airlines, forwarders and ground handlers could all potentially see a business impact. For example, vehicle parts, electronics and pharmaceuticals are amongst the goods flown by air from Canada and Mexico.

Aside from increased costs to consumers and a potential reduction in purchases and airfreight demand for certain products, it may also have an impact on the nearshoring trend where production has been moving to Mexico.

Chris Clowes, executive director at global supply chain and logistics consultancy, SCALA, commented: "Waging a trade war with four of its biggest trading partners could have negative ramifications for the US.

"Nearshoring manufacturing to the US will be hard to justify for some companies, given the higher cost base and the expertise and sheer scale of operations that overseas manufacturing has previously provided.

"And with business challenges come consumer impacts. Rising costs would likely lead to cost-push inflation – meaning the consumer pays more for the goods and services they seek – and dampened purchasing power.”

E-commerce crackdown

As well as tariffs, e-commerce stakeholders are now preparing for a blow to trade following the announcement that the de minimis exemption, which permits imports under $800 without duties, is being eliminated for all goods from China and Canada, as well as Mexico if the tariff goes ahead as announced.

The White House executive orders regarding tariffs levied against the three countries also stipulated that de minimise would end. 

"For avoidance of doubt, duty-free de minimis treatment under 19 U.S.C. 1321 shall not be available (under the executive order)," said Trump in the executive orders.

On 17 January, US Customs and Border Protection (CBP) announced a Notice of Proposed Rulemaking (NPRM) aimed at tightening the de minimis duty exemption. 

Over the last 10 years, the number of shipments entering the US claiming the de minimis administrative exemption increased by more than 600%, said CBP in a release detailing the proposed new rule.

"Low-value e-commerce shipments pose the same health, safety, and security risks as higher-value shipments,” the government body said.

"We cannot let Chinese-founded e-commerce platforms gain an unfair trade advantage while American businesses play by the rules,” added National Economic Advisor Lael Brainard. 

According to the Office of the United States Trade Representative, based on 2022 data, China was the top supplier of goods to the United States, accounting for 16.5% of total goods imports.

The top five suppliers of US goods imports in 2022 were: China ($536.3bn), Mexico ($454.8bn), Canada ($436.6bn), Japan ($148.1bn), and Germany ($146.6bn). U.S. goods imports from the European Union were $553.3bn.