China Air Freight Rates Surge, India-U.S. Ocean Freight Rates Keep Declining as Trade Deal is Close

Air Freight Surge

A couple weeks ago, the trade war between the U.S. and China escalated. China announced export controls expansions and President Trump responded with a threat of increasing tariffs on China by 100% on November 1st. There was an easing of rhetoric between the Trump Administration and China, and the White House hasn’t made an official announcement of putting that big tariff hike in place as of the time of this writing. However, while there wasn’t enough time from the announcement to rush ocean freight shipments out before November, air freight rates from China did surge.

Greg Knowler reported on it in the Journal of Commerce (JOC):

Air freight demand on the trans-Pacific has risen sharply as shippers advance orders following a threat by President Donald Trump to impose an additional 100% tariff on Chinese goods from Nov. 1.

…

The Oct. 10 tariff announcement saw an initial 19% increase in rates compared with the previous week to $5.30 per kilogram, but rates have remained mostly flat since then, according to Freightos….

One factor preventing rates from spiking despite the rising demand is the available air freight capacity on the trans-Pacific.

Glyn Hughes, director general of The International Air Cargo Association (Tiaca), said freighter operators were prepared for the frontloading and there were no capacity shortages on China-US routes.

…

In the week after the tariff announcement, available air freight capacity on China-US routes increased 24% compared with the previous week, according to data from air cargo analyst Rotate. Capacity deployed on the routes is currently up 21% year over year.

Prediction for Air Freight Moving Forward

With an initial surge to air freight rates after the tariff hike threat followed by air freight rates remaining flat after, I would expect air freight to remain at somewhat the same level for the next week.

It will be interesting to watch if the November tariff hike actually happens. The Trump Administration did quickly point out, after the president’s announcement, that those tariffs hadn’t gone into effect yet and might not happen. Just as scheduled expanded export controls from China may not happen. If the tariff hike does not happen on the 1st, importers may continue to push extra air freight cargo in the moment to avoid the possibility of tariffs increasing later.

However, it’s important to note that air freight often increases in November and December for last minute stocking and restocking for the big Christmas shopping season.

The October surge to beat the potential tariff may eat into November and December air freight volumes. If it did so significantly, that could not only mean air freight rates remain stable in the final two months of the year when they often increase, but freight rates could even potentially decrease some.

If the tariff does go into effect, it would likely decrease demand for air freight from China and could easily create lower air freight rates.

Consumer behavior will come into play too. Gas prices in the U.S. are way down to a four-year-low right now, and that could boost holiday shopping. If consumer shopping is particularly robust, that will likely increase air freight demand from retailers in November and December, putting upward pressure on air freight rates.

My expectations for the rest of 2025 air freight rate behavior is for it to be more stable than normal. Carriers will try to boost peak air freight season rates, but this October surge will likely make that more challenging than normal for the next two months.

India to U.S. Ocean Freight Rates Continue to Fall

In early August, President Trump signed an executive order upping the tariff on goods from India to 50% over India importing and selling Russian oil. That tariff has been successful in negatively impacting U.S. import volumes from India and ocean freight rates associated with them.

Those freight rates are continuing to fall.

Bency Matthew reports in the JOC:

Ocean rates on the India-US trades continue to weaken as carriers contend with lower westbound bookings in a tariff-squeezed market environment.

Average spot rates from West India to the US East Coast have dropped by $400 to $500 per container over the last three weeks, according to new data from freight forwarders.

Sources have pegged rates from Nhava Sheva to New York at between $1,500 and $1,600 per FEU, down from $1,900 to $2,100 quoted by the lead operators on the trade at the end of September.

Platts, a sister company of the Journal of Commerce within S&P Global, put India-USEC spot rates at $1,550 per FEU as of Oct. 22, a 3% decline week on week.

India-U.S. Trade Deal Expected Soon

Speaking of effectiveness, there are reports that a trade deal between the U.S. and India is close.

Dan Strumpf reports in a Bloomberg article, republished by Yahoo! Finance:

New Delhi may agree to gradually reduce its imports of Russian oil and allow the US to export more non-genetically modified American corn and soymeal, according to the report. An agreement may be announced when President Donald Trump and Prime Minister Narendra Modi possibly meet at the Association of Southeast Asian Nations summit in Malaysia, the newspaper said.

The Asean Leaders Summit is scheduled in Kuala Lumpur from Oct. 26 to 28.

That means we could be just a few days away from a new trade deal being announced. It’ll be interesting to see what kind of volume and freight rate boost it will give to ocean freight shipments from India to the U.S.