We only need to look at the sudden escalation in the Red Sea in December 2023 to understand the impact geopolitical tensions can have on air freight.
2025 is likely to see more of the same.
Trump tariffs
Trump has vowed tariffs of 60% tariffs on imports from China, which could prompt shippers to relocate production to Southeast Asia, South Asia or South America (or reroute semi-finished products manufactured in China to the US via these regions after final assembly or repackaging).
Trump is proposing tariffs on all imports into the US, but they will be at a much lower level from the rest of the world compared to China.
Shippers will also look to avoid tariffs by frontloading imports before they come into effect and by setting up supply chains which circumvent the tariffs, as we have seen in the most recent year where goods were exported first to nations such as Vietnam or Mexico and then re-exported to the United States.
Criminal activity
Rising geopolitical tensions have led to increased criminal activities in the air cargo supply chain.
Security concerns due to incendiary devices found in European parcel networks mid this year have prompted stricter security measures for air cargo, such as heightened advanced information filing in the US and EU.
With heightened global tensions, the threat of further criminal activity remains. If any similar attempts were to succeed, it would have a profound impact on the aviation safety regulations, causing delays or even restricting certain goods from being transported in passenger belly holds.
Severe weather and climate change
As highlighted in the Xeneta 2024 Outlook (published November 2023), weather events will continue to disrupt air cargo supply chains.
Due to climate change, the regularity of severe typhoons and hurricanes witnessed in 2024 is likely to persist - causing delays, cargo backlogs and increased air freight costs.
Rising environmental regulations will further burden those shippers who have deprioritized making the shift from air to ocean due to the ongoing ocean freight disruptions in 2024.
For example, the EU's ReFuelEU initiative will require aviation fuel suppliers to blend a minimum of 2% sustainable aviation fuel (SAF) in EU airports starting in 2025, increasing to 70% from 2050.
As SAF is three to five times more expensive than fossil fuel, this regulation is expected to increase air freight costs by 1-3%.
“Please return to your seat and fasten your seatbelt – we are entering an area with unpredictable turbulence.
"The best approach to a period of high uncertainty is to be alert to quantitative signals from the marketplace as it could avoid shippers over-reacting and creating a vicious circle of escalating rate."
Niall van de Wouw
Chief Airfreight Officer, Xeneta