This week:
- Trans-Pacific air cargo volumes and rates down as shippers choose ocean before tariffs return
- US and EU agree to framework trade deal, US sets 15% tariff rate on most imports from the EU
- Trucking market in the US split, as full truckload rates suffer, but LTL industry remains profitable
- Long-awaited LTL reclassification goes live, but FedEx Freight delays implementation until Dec. 1
Trans-Pac Air Cargo Down Amid Ocean Frontloading, Upcoming Return of Tariffs
The trans-Pacific air cargo market is currently in a downturn, according to reporting by the Journal of Commerce (JoC).
Greg Knowler, senior editor for the JoC’s European coverage, said in an industry roundup published Friday that two factors are responsible for the slump: shippers frontloading goods by sea to get ahead of looming US reciprocal tariffs, and the collapse of Chinese eCommerce demand following the elimination of the US de minimis exemption.
The Trump administration’s reciprocal tariff policy is set to return in August with much higher import duties on Asian goods. A pause on the policy was originally set to expire earlier this month. Many US businesses used the extended break to move products via the more cost-effective ocean routes.
“We do see high levels of inventory combined with a relatively long lead-up to the new tariff announcements, which allowed shippers to plan ahead and choose a more cost-efficient method of transport,” Jonathan Mellink, head of sales and marketing at air freight analyst Rotate, told the JoC.
This shift to sea freight is reflected in air cargo pricing. According to the Freightos Air Index, spot rates from major Asian origins to the US have remained flat or decreased. Rates from China to the US are currently $5.17 per kilogram, down 7% from early July and a 3% year-over-year decrease.
“The 90-day tariff extension spurred a surge in ocean volumes and was likely long enough so that most frontloading ahead of August has been done by container,” said Judah Levine, head of research at Freightos.
Contributing to the decline in air cargo volumes is the drop in eCommerce shipments, which had been a primary driver of freight demand. The Trump admin eliminated the $800 duty-free de minimis exemption for low-value imports from China back in May, which had an immediate impact on air cargo volumes and rates.
Rotate’s data for July shows that China’s eCommerce exports to the US fell by 44% year-over-year.
US Agrees to Trade Deal Framework, Sets 15% Tariff Rate for EU Products
The US and the European Union struck a framework trade agreement on Sunday, establishing a 15% tariff rate on most imports from the EU. The deal avoids a potentially devastating trade war between two allies that account for nearly a third of the global economy.
The agreement was announced while US President Donald Trump was in Turnberry, Scotland, for the weekend, but news reports say the deal was forged after months of tense negotiations. At one point, Trump had threatened the EU with a 30% baseline tariff when the pause on US reciprocal tariffs ends next month.
As part of the deal, the EU committed to a significant increase in spending in the US. This includes a planned $600 billion investment in the US along with future purchases of $750 billion in American energy and “hundreds of billions of dollars” in military equipment, according to Trump.
As a framework agreement, some details remain to be finalized, including specific tariff rates on some goods.
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Tariff Uncertainty, Excess Capacity Sink Truckload Rates; LTL Remains Profitable
The US trucking industry is sharply divided, according to a recent analysis by Supply Chain Dive. On the one hand, excess capacity continues to depress full truckload rates, while less-than-truckload (LTL) carriers maintain their profitability.
According to the latest TD Cowen/AFS Freight Index, this divergence comes as businesses delay spending decisions amid uncertainty about the economy and the Trump administration’s tariffs.
“Trade policy remains an unsettled picture and businesses are opting for a wait-and-see approach and delaying spending decisions,” said Andy Dyer, CEO of AFS. “With no catalyst to ignite demand, some carriers are buckling under the pressure.”
The truckload sector is facing what the index projects will be its tenth consecutive quarter of rates at or near the bottom.Q3 ’25 rates are expected to be just 5.6% above the 2018 baseline, representing a 0.4% decline from the current quarter. Industry observers say this prolonged slump is due to a supply-demand imbalance that dates back to the pandemic, when a surge in demand led to several new carriers entering the market.
The LTL market stands in stark contrast to the truckload sector. By avoiding discounted pricing and focusing on profitable lanes and reliable contracts, LTL carriers are holding firm on rates.
The LTL freight index is projected to show a 1% year-over-year increase, its seventh straight quarter of positive year-over-year change. This pricing discipline is evident in the numbers: while average weight per shipment fell 5.1%, the cost per shipment declined by only 2.9%, indicating stronger per-pound rates.
New LTL Classification System in Place, But FedEx Freight Delays Enforcement
The long-anticipated revamp of the LTL industry’s freight classification system officially took effect July 19, but FedEx Freight — the nation’s largest LTL carrier — is delaying enforcement of the new rules until December 1.
In a public statement, FedEx Freight said the reason for its delay in implementing the new National Motor Freight Classification (NMFC) rules is to “ensure ample time to fully adapt processes and pricing.”
Given that the company controls 15% of the LTL market, its decision could have wide-reaching impacts. Although other carriers have not yet announced similar delays, some analysts believe they might, as FedEx Freight’s thousands of customers have a temporary reprieve from learning about the new classification system.
The move comes at a complex time for the LTL sector. While carriers have maintained strong pricing power, with the LTL producer price index up 7.8% year-over-year in June, they are facing a weak market for freight volume. Recent reports have shown shipment counts falling for major players, including a 6.8% drop at Old Dominion Freight Line and a 5% decline at XPO in May. FedEx Freight’s own volume fell 1% year-over-year in its most recent quarter.
The new NMFC rules are designed to better align shipping rates with the amount of space a product occupies in a trailer. For example, low-density, bulky items like furniture or plastic foam may see rate increases, while compact, high-density goods like steel fasteners or ceramic tile could become cheaper to ship.
