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End of tax-free loophole for low-value goods disrupts air shipments to US from China

July 4, 2025
in News
End of tax-free loophole for low-value goods disrupts air shipments to US from China
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By Casey Hall and Lisa Barrington

SHANGHAI/SEOUL (Reuters) -Air cargo shipment volume from Asia has declined by double digits since the U.S. cancelled a tax-free exemption for low-value packages from China early in May, trade groups and analysts said.

Air cargo demand from Asia to North America declined 10.7% in May versus the same month a year earlier, showed data from the International Air Transport Association, illustrating “the dampening effect of shifting U.S. trade policies,” IATA Director General Willie Walsh said in a report published on Monday.

Shipments valued under $800 – often sent by air to U.S. customers of low-cost e-commerce platforms such as Shein and PDD’s Temu – fall under the so-called de minimis, or too-small-to-matter, tax exemption.

Since May 2, however, such shipments sent from China and Hong Kong have been taxed at a rate initially as high as 145% before settling to as low as 30% after a mid-May trade detente between the U.S. and China.

The pair continue to negotiate on trade, with the U.S. relaxing export restrictions on software, ethane and aerospace to China this week, ahead of July 9 when the U.S. plans to re-impose a range of steep tariffs targeting multiple countries.

The volume of low-value e-commerce shipments from China to the United States in May saw a particularly steep decline, industry experts said.

Such shipments fell 43% in May from the previous month, showed estimates from air cargo consultancy Aevean, but rose to other main export markets including Europe and South-East Asia.

It is not clear whether such dramatic declines will continue, said Aevean Managing Director Marco Bloemen, given businesses had anticipated the de minimis halt and because the tariff rate was lowered mid-month.

“Will those e-commerce players bounce back to the U.S. now they’re paying 30% duties instead of zero duties?” Bloemen said. Companies turning to other markets due to U.S. trade policy uncertainty is also likely weighing on shipment volume, he said.

“That’s a trend that we’re expecting to continue – there’s more Europe-destined e-commerce expected in the month of June, also to markets like Latin America.”

Air cargo consultancy Rotate said e-commerce platforms were focusing on other markets to replace lost U.S. demand, with significant export growth to the European Union and Asia-Pacific region.

Shein and PDD did not immediately respond to Reuters’ requests for comment.

CARGO CUT-BACKS

Low-value e-commerce out of Asia has been taking an increasing proportion of global air freight and boosting airlines’ cargo businesses.

Last year such shipments – at 1.2 million metric tons – made up 55% of goods shipped from China to the U.S. by air compared to just 5% in 2018, Aevean data showed.

As Asia-to-U.S. demand fell in May, airlines pulled freighter aircraft off trans-Pacific routes and placed them elsewhere, industry experts said.

Some of that demand has now returned as companies take advantage of tariff pauses between the U.S. and a number of countries, but flight frequencies are reduced, they said.

“Some of the larger players that were chartering three flights a week have cut back to two,” said e-commerce consultancy Cirrus Global Advisors.

Direct freighter capacity between China and the U.S. in June was 11% lower compared to March, wiping out growth in capacity over the past year on those lanes, Rotate data showed.

Asia-focused freight forwarder Dimerco Express estimated its e-commerce bookings were down 50% in May and June. As a result, scheduled freighter flights continue to be cancelled, it said in a report.

The de minimis rule, which dates to 1938, had been a target of criticism from American lawmakers as a loophole that lets Chinese products skirt U.S. tariffs and allows illegal drugs and precursors to make opioid fentanyl to enter the U.S. unscreened.

(Reporting by Casey Hall and Lisa Barrington; Editing by Christopher Cushing)

The post End of tax-free loophole for low-value goods disrupts air shipments to US from China appeared first on Reuters.

Tags: Air cargoChinaInternational Air Transport AssociationReutersShipmentsYahooYahoo Finance
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