News / Air cargo: Tension along Asian supply chains as shippers await US decisions

© Tamer Adel

“It’s really very quiet. Everybody is waiting for the final result.” 

And no, we’re not talking about the final of the UEFA Women’s Euros. Shippers are waiting to discover the new – and perhaps even permanent – tariffs to be mandated by the US. And people don’t want to ship anything first. 

“The tariffs levels have still not been released for Singapore, India, Taiwan and China,” continued Kathy Liu, VP global sales & marketing at Dimerco Express Group. 

“And those four areas are the gateway for Asia, as well as the key manufacturing locations. 

“Shippers are all waiting for the result for those four countries.” 

That wait has translated into lower capacity and rates, broadly speaking.

Freighter capacity out of Asia Pacific dropped 2% last week, compared with the average of the previous month, according to Rotate’s capacity database. Freightos FAX shows rates from South-east Asia to North America have dropped 6% since Monday, while Greater China to North America has edged up 2%. 

All the countries mentioned currently face 10% tariffs – but China has an additional 20% fentanyl tariff. Once shippers have ascertained the most economical sourcing country, the flow of goods may restart. 

Ms Liu said shippers could move easily between production lines in different countries. 

“It’s actually not that difficult to switch, because those manufacturers have kept the production lines in China, as well as extending to South-east Asian countries like Vietnam, India, Thailand. So they have resilience in both areas. They just need to shift the order from, for example, Vietnam’s plant to China’s plant, then it’s done.” 

She added that manufacturers were also waiting to assess what ‘transhipment’, or ‘country of origin’ will mean.  

“We haven’t seen any details on how you define it. I think it depends on the percentage of each product, or the raw material, but we are not sure. Once we know that and the tariff, shippers will make the decision on how they manage their supply chain.” 

However, even after the tariffs have been mandated, Dimerco isn’t expecting a rush of goods. Ms Liu said: “Overall, the demand is not that strong, either in the US or the European market. Shippers have front-loaded a lot of their products or inventories.  

“But I do believe the peak season will be still there, but mainly out of South-east Asia – Vietnam, Thailand, Malaysia, and Taiwan. Those locations will still see the peak season. But for China, ecommerce has only recovered by about 30%, compared with before.” 

And she questioned whether there was sufficient demand in Europe to create a significant peak. 

“What we see is a very softened economy in the EU, because the buying power is not that strong compared with before.  

“But I think potentially the Chinese government is trying to encourage more trade between China and Europe. But Europe’s not able to buy very much. That’s the problem.” 

However, as ever in air cargo, there are pockets of hope for forwarders and carriers. 

“South America is something new [for Asian exports], especially from China. And Brazil, Mexico and Peru in particular for electric vehicles,” she said. 

Freighter capacity from Asia Pacific to Latin America has gone up 15% in the past month, compared with the previous four, according to Rotate. Mexican carrier Mas Air Cargo operates into China.

CEO Robert van der Weg told The Loadstar: “Overall business is on track with our expectations this year, despite the significant challenges this year has seen so far.  

“But for airfreight, there is always opportunity in disruption, which is what we are banking on.” 

Ms Liu said Asia-Latin America was a “new booming market for Asia”.

“But the buying power and demand cannot compare with the US or Europe, and the products going there are mainly not that high value. It’s the same with ecommerce.” 

Another bright spot is Taiwan, where there is a strong market for AI servers into the US, a product currently exempt from tariffs. But, added Catherine Chien, VP digital marketing for Dimerco: “Everybody in Taiwan is like, what do you think is the percentage we will get? The pressure is on Taiwan’s government to negotiate better.” 

According to Freightos FAX, spot rates for standard shipments from Taiwan to Los Angeles have stayed flat, at $5.78 per kg, for months, although express and standard combined has dropped from $6.46 to $3 per kg since the end of June. 

Intra-Asia also remains strong.

“Besides ecommerce, it’s mainly because of production line relocations into South-east Asian countries, but the raw materials are still supplied from China. So this year, intra-Asia trade is quite busy and demand is keeping very strong, on the high side,” said Ms Liu.