[00:00:03] Speaker A: You are listening to the Freight Buyers.
[00:00:05] Speaker B: Club, a home for those interested in.
[00:00:07] Speaker A: International trade, shipping, procurement, logistics and air freight. In fact, all things supply chain in the Americas, Asia and beyond.
[00:00:18] Speaker C: Hello and welcome to the Freight Buyers Club. I'm Mike King. This episode is produced with the kinds and port of MSC air cargo. So a big thank you to them. As many of you know, MSC now operates not just the world's largest container shipping fleet, but also its own dedicated air freighter network.
Today we are diving in to what's probably one of the biggest shakeups in cross border E commerce and air cargo in years. And that's the unraveling of the US De minimis rule. That's the loophole in shorthand that's let millions of parcels under $800 enter the US without paying duties.
It's sort of the secret sauce behind the explosive rise of platforms like TEMU and shein, which I think I pronounce wrong every single time. Hopefully the guys can correct me today. So anyway, all of this, it's changing quickly. We've seen major policy reversals this year under the Trump administration.
A surge in tariffs now, a looming end to all duty free low value imports by late August. For air cargo, it's a potential demand cliff for, for E Commerce, it's a business model under threat. And there's also a lot more going on too, including more changes to general tariff rates, not least from China where we're seeing another truce this very week which could boost trade into the US Ahead of the holiday season.
Joining me to make sense of what's really going on and what's coming next, ahead of the traditional Q4 peak season for air freight are three industry insiders who know this space better than most. Damian Brett, the editor of Air Cargo News, thanks so much for jumping in today at very short notice and welcome to the Freight Buyers Club.
[00:02:04] Speaker B: Thanks for having me, Mike. And it's yeah. Good to be making my first appearance on your podcast. So yeah, cheers.
[00:02:11] Speaker C: You're very welcome. He's joined today by retaining star Brandon Fried, Executive director of the Air Forwarders Association.
Welcome back, Brandon.
[00:02:20] Speaker D: Mike, it's always a pleasure being with you. Thanks for inviting me.
[00:02:23] Speaker C: You're too kind. And last but certainly not least, it's Neil Jones Shaw. He's the senior advisor at the Boston Consulting Group, Managing director at Enoa Capital, which is a PE firm specializing in aviation related businesses. And many of you will know him as a former EVP at Flexport and an ex Heath cargo officer at Delta Air Lines. Welcome back, Neil.
[00:02:45] Speaker A: Thank you Mike, as always, it's a pleasure, pleasure to be with you. It's great to see you today.
[00:02:50] Speaker C: Okay, a quick apology to listeners. I should say it's a rather, rather gravelly voice today there was a big football match of the weekend over here in England which my team lost but didn't really stop me singing. So apologies if I'm rather gruff today.
But enough of that. Mr. Brett, to you first.
Let's try and put some perspective on this recent policy shift. And I'm not Talking about the 90 day tariff truce with China that was announced. This, we will come to that later. I'm talking de minimis. After a few aborted deadlines at the start of May, the Trump administration effectively ended the de minimis exemption for shipments from China, leaving them subject to tariff regimes. Now from 29 August, the exemption is being suspended globally for anyone not steeped in customs policy. What exactly changed here and why does it matter so much for cross border E commerce and air cargo?
[00:03:47] Speaker B: Yeah, I mean for air cargo, obviously. The last few years, much of the growth that we've seen in air cargo has been been fueled by the E commerce platforms like Sheen. I'm going for the same pronunciation as you, Mike and Cebu. They've been taking advantage of this loophole that allows shipments that are addressed to an individual and worth less than $800 to be imported tariff free, free of any duties, and also importantly, skipping a lot of the customs procedures so it can get in nice and quickly, nice and cheaply. But yeah, as you say, in May, that end of China shipments from China and Hong Kong and at the end of August is going to be rolled out worldwide. I mean, one thing that immediately struck me was firstly, I should say it was unexpected, the worldwide rollout. I think a lot of people were expecting it's coming from China at the start of the year in some form. Maybe not as far as they actually ended up going, but the rest of the world, I think people were expecting that to come in a couple of.
[00:04:49] Speaker C: Years and that 20, 27 it was scheduled for.
[00:04:52] Speaker B: Yeah, exactly. So that being brought forward was quite unexpected.
One thing that immediately struck me is that it kind of levels the playing field for companies looking to ship E commerce from China. No longer are they going to be at a disadvantage compared to other locations around the world. Everyone's going to be having to get their shipments in, facing our customs scrutiny that they weren't for and pay the tariffs and the duties. But yeah, to put it in context, in terms of air cargo, it fueled massive growth over the last few years, I was just ahead of the podcast. I was looking at some figures and I think between 2015 and 2024 last year the number of minimus shipments into the US has increased by about 800%. It's reached about 1.3 billion the minimum shipments. And that's all been going via air cargo or much of it anyway. Because these E Commerce players, they need the shipments to get there quickly. The consumer's not going to wait four or five weeks for it to come in on a, on a vessel. And last year figures from Zenita showed around 50% or they estimate that 50% of Trans Pacific volumes were E Commerce. It's hard to put an exact number on that because no one really knows what is E Commerce and what's not. And that was the Zenita estimate. And the overall E Commerce volumes grew by 20 to 30%. So to have a lot of that taken away, perhaps moving to kind of ocean shipping instead of air freight because companies can build up, maybe switch to moving up inventories in the U.S. yes, going to drastically affect the air cargo market.
[00:06:25] Speaker C: Brandon, what's your take on this, this policy speed up? Is it a bit of a surprise that it's gone global?
How does it affect your members?
Are there any positives?
[00:06:35] Speaker D: Yeah, well, you know, it's hard to believe that the party is almost over. I mean it's just this was wildly successful for air cargo. Not all freight forwarders were involved in de minimis shipping, but we had a few that were, they made significant investments. I think we weren't expecting this wholesale Broadbush stopping of the program.
It's going to create a lot more complexity, a lot more costs, administrative costs. There's going to be more duty supplied and I don't think the United States has really.
We haven't really felt the actual impact of this yet. You know, we've been pretty much continuing to buy goods through online channels for the past few months. But those were, I assume, goods that were, they were coming to Minimus, but they were also front loaded into U.S. warehouses. Well, that, that stock's dwindling and we're really going to see the impact probably this time next month, give it a few more weeks. But the proverbial E Commerce horse is already out of the barn. I don't think the American consumer is going to sit back and just accept this from a long term perspective. I think that ultimately this will cost the President some political goodwill going forward and it's going to be a big challenge. So right now, forwarders that are involved in this are bracing their customers to get ready for what could be some rough times ahead.
[00:07:57] Speaker C: Can you give us any idea, Brandon, about how this plays out?
We did see Customs and Border Protection struggle earlier this year when the exemption on China and Hong Kong was originally introduced and then delayed. So that was February and then, then it was late April and then it became the beginning of May.
Are you confident that CBP can now handle this? This shift to this is a lot of extra filings. Assuming there's not a huge end of volumes and some of this comes in under tariffs.
Are you confident that they've got these systems in place and there's not going to be all sorts of log jams?
[00:08:32] Speaker D: I am not totally confident, no. I think that they have made great strides in getting systems in place, but they're also going to be leaning on the airlines to collect duties and facilitate these filings. It's going to create a massive administrative burden for them and it's going to slow things down. I don't know whether CBP has the manpower that's required to process this onslaught of shipments.
So the jury's still out. We'll have to wait and see.
[00:09:03] Speaker C: Neil, if I could bring you in on the logistics side, but you've worn a number of different hats over the years in terms of the air freight industry.
Who in your view wins and loses? Presumably the Chinese E tailor platforms are on the losing side here. But can anyone win or is this just a negative for air cargo as a whole?
[00:09:24] Speaker A: It's a great question. I don't think there's an easy answer to this. I think, you know that the first big loser here is going to be the consumer. Right? The consumer is going to end up paying more. They're going to get slower transit times. And so, you know, they've gotten pretty drunk on this E commerce business. And I think that it's going to be a little bit of a rude awakening for a lot of people that they might be priced out of the market. Right. You know, for some of these E commerce and it will disproportionately affect sort of the lower income groups. Right. That will bear more of the brunt of these price hikes. But putting the consumer aside for the time being, I think that, you know, there are losers, but I think there's also sort of positives and winners through this process. So if I just take a second, you know, clearly, you know, the, the Chinese E commerce companies, when De Minimis was taken away for China and Hong Kong in May, they were scrambling right they didn't expect this to come as quickly as it did. And they certainly lost traction particularly in their North American business. Right. Particularly their U.S. business. And I think year over year in June, I think the E Commerce volumes from China and Hong Kong to the US were down something like 50%. A big, big number. Right. And this was a major, major market for them. However, overall Chinese E Commerce volumes, you know, were actually up year over year when you look at sort of the global kilo count. And so what that tells you is that they started to redirect to other markets, right? They stopped their promotions in the US and started looking at other markets. You know, one of the big markets where they pivoted to has been Latin America. And I have a lot of experience in Latin America, so I'll just use that as an example, is that the transit cargo coming through the US to Latin America has absolutely exploded. All of these carriers out of Miami are doing extremely well. Rates on the southbound out of Miami to all locations in central South America and even many parts of the Caribbean are much higher than they were, you know, before May. And that's because a lot of this volume, it's finding its way through Miami in bond and then heading into Latin America. So I think that if you're asking that, you know, are the air carriers taking a hit, of course they are. I mean, you know, the trade into the US is down, but those that have the ability to redeploy assets, right, to take advantage of some of these new flows are also finding new opportunities and new markets, right. Instead of flying ten times a week to Chicago, maybe it's only four times a week to Chicago and six times a week now to Miami in order to take advantage and try and move these flows to the second carriers that are going. So I don't think it's completely a lose lose here. And I think when you look at some of the results from the air freight carriers, you know, their second quarter results were actually quite positive, you know, quite good growth, you know, year over year and all of that. But I agree with Brandon. We haven't felt the brunt of this yet. There was a lot of inventory that was sort of pre stage, right? There was, they, they were, they're fulfilling as much domestically as they can to avoid. But what I hear is that their long haul demand is starting to come back. I think people are starting to accept that, particularly with China and Hong Kong origin cargo, that the tariffs are here, they're here to stay. And just heard from one of the big Chinese E Tailers that their volumes to the US Are beginning to rebound and so they're coming back. They won't come back to the extent they were and certainly their sourcing and fulfillment strategy is going to change.
But I think that we still have to wait and see over the next three, four, five months to see what the global impact is going to look like before sort of, I guess, making any final determinations on the impact of the industry. So I'm, I'm a little hesitant to call it doomsday for air freight because I just think it's a little too early and not ready to make that call yet.
[00:13:15] Speaker C: Where does this leave the integrators? The DHL, the UPS is FedEx. Where how does this affect them? They were, they were doing all right on, on this E Comm. Wave when they, you know what I mean?
[00:13:23] Speaker A: I think they were moving a decent amount of E Commerce. Remember, you know, their, their fleets are mainly dedicated to moving their own express small package business.
[00:13:31] Speaker B: Right.
[00:13:31] Speaker A: Most E commerce is moving into the US and for that matter all over the world as air freight consolidations.
Right. And then they get broken down and then they, you know, they turn into packages as they get dropped into either FedEx, UPS or the USPS or, or foreign post, you know, for final mile delivery. So FedEx, UPS and DHL while they're carrying some of this. Right. I don't think it was the core of their business by far. And so I think all of these integrators have taken it on the chin a little bit over the past year, year or two. You know, they've had to roll back some of their profit forecasts and things like that. How much is due to specifically to E commerce or to just other macroeconomic conditions? Right. Slower growth and things like that that are impacting their business, I don't know. So I think they faced a hit, but I don't think it's been sort of the major item impacting their results.
[00:14:26] Speaker C: Thank you, Neil. Let's just move beyond de minimis for a little bit and look at this complexity in the trading picture. Just increases by the week, it seems. Well, I don't know. Maybe we feel that there's some certainty now. On August 7, the US rolled out new tariffs on dozens of countries.
Some big names in India, Taiwan, Malaysia and Brazil all negatively affected. All the countries shipped quite a lot by now. Then in the second week of August when we're talking tariffs on China were postponed another 90 days on until November 10th. This means the US will keep its tariffs on China Imports from China at 30%, so that's 10% reciprocal tariffs plus 20% fentanyl tariffs. Trade negotiations between the US and China, of course, the two biggest economies in the world. They continue a pace, we are told.
What sort of impact are you expecting this to have on air cargo flows into the US from China, Damien? Or indeed vice versa?
[00:15:29] Speaker B: Yeah, yeah. I mean, it's so hard to, as both Brandon and Neil were saying, it's so hard to predict what's going to happen and how the trade negotiations are going to go.
You can only look at what's happened with the previous tariff announcements and use that as, as a bit of a guide. I think the strategy has been continue as normal and hope that some kind of agreement is going to be reached. And then as you get closer to that deadline, then you will suddenly see shipment volumes increasing as companies look to kind of front load volumes ahead of the tariffs coming in. But yeah, so hard to, so hard to predict what's going to happen. At least they've got that certainty for the kind of peak season volumes and they can get those in nice and early.
But yeah, it's, it's very difficult to.
[00:16:20] Speaker C: Say so much change, so, so quickly that to the point where if we'd have actually recorded this yesterday would be pretty much obsolete by now.
Brand, how do you, how do you, as you know, representing air forwarders, how do you help your members navigate this change? Is it all about just telling people to be on their toes, to be flexible, you embrace change, or is the more that you do?
[00:16:45] Speaker D: So we've come to realize in the freight forwarding community that uncertainty is the rule of the day.
And, you know, right now we are advising our members to go and talk to customers, tell them that anything can happen anytime. This is what's on the table currently, but it might not be this time tomorrow and just develop mitigation strategies. I think one of the things you need to do right now as a shipper is you need to, you know, figure out how you're making your duty payments. You know, maybe you can defer.
That's one thing. The second thing is, is that make sure your HTS codes are in order, make sure that you're getting the proper tariff treatment. But I gotta tell you, Mike, I talk to our members, matter of fact, we do these surveys, we're doing one this week, just, we call it the Houzz Business Survey. And we're asking our members what's going on right now and they just said they've accepted uncertainty to be the order of the day and they're busy.
Most of the respondents tell us we are up in activity, which is encouraging at this point. Now what the reasons are, we can speculate, but they're busy.
[00:17:56] Speaker C: Well, people can make money out of complexity and on obstacles. I mean, that is forward. Well, that's what. Freight forwarder.
[00:18:01] Speaker D: You got to remember something a lot of times that's the freight forwarder's role is to, you know, we try to simplify complexity, but we also provide alternatives for shippers as well. And as Neil just said earlier, activity in Latin America, we agree with that. A lot of people are actually looking away from the United States. They're going into Latin American destinations, South American and whatnot. And that's where they're seeing the opportunities are now. They're not necessarily abandoning the United States. They're just looking for areas where they can find profitability.
[00:18:38] Speaker C: Yeah, I mean, if you look on the shipping lines as well, they're, they're not, they're not. Some of them have downgraded profits, but some of them upgraded profit forecasts. So it's interesting as we get more of these Q2 financials coming in, we get a better picture of exactly how everyone's performing on, on this. I mean, at the end of the day, it's the shippers who are probably not enjoying this the most. If we can have a look at some of these markets a bit more specifically to see what's coming up. Damien. India's facing a 25% tariff, but there's talk of that going up to 50%, maybe even later this month over its purchases of Russian oil.
Now, I think Cargo News might have reported this. India flies around 200,000 tons of air freight into the US each year. So what would this tariff mean as far as you can sort of guess? I guess to a degree. But does it mean for sourcing rate capacity deployment? It's a bit of a hit.
[00:19:34] Speaker B: Yeah. Yeah. I mean, one thing to say about India so far this year is for the freighter operators, it's been kind of a bit of a safety, safety net market because it's been growing quite well. So when Trans Pacific hasn't been performing so well, they look to move their freighters into Latin America, capitalize on, you know, flower surges. But India is another place where they've been putting in extra freighter calls. So, yeah, overall tariffs are bad. Right. I mean, it's going to have a, have a negative impact on demand and carriers could lose that safety net of India to be able to add capacity in when other Markets aren't doing so well. The article you're referring to, actually we were working with that on the consultant Evian. They had some interesting thoughts on some of the tariffs and they kind of made the point that although India is a large air freight market and the tariffs are at 25% at the moment, you also need to take into account the value of the goods that are being exported from those countries.
So India is of the countries that had tariffs implemented in August. The value of goods for India, they were about midway down the table and that also included pharmaceutical shipments. And it's mind standing at the moment that pharmaceutical shipments aren't included in the the tariffs. So they're exempt from those US tariffs for now anyway.
[00:20:54] Speaker C: Now.
[00:20:55] Speaker B: So India's pharmaceutical shipment should be at least protected for now, if I'm right on that. But then once you've removed that, you know, it reduces the value even further and you kind of look at, well just for example, a 30% tariff on a $10 t shirt is an extra $3. You know, is that going to have a huge impact? It might have an impact, certainly will have an impact. But will it have much of an impact on a kind of 30% tariff on a laptop that's worth $800 and is now suddenly going to be sold for $1,000, $1,000 plus. So you really have to kind of weigh up all of these different metrics, try and understand how it's going to have an impact on the market. And so it's hard to say, but just from the volumes alone and the fact that India's been a bright spot for cargo ratio is certainly a negative and it's not going to be good for air cargo volumes.
[00:21:48] Speaker C: We always have this tendency to focus on the China US market, the big trans. But Brandon, a lot of these reciprocal tariffs that were announced book and shamed on the 7th of August, they hit electronics and shooting equipment from elsewhere. This is desktop PCs from Taiwan, it might be office kit from Malaysia. These are just your classic sort of time sensitive air cargo items. It's a bit of a worry if you're in it's great business.
[00:22:15] Speaker D: I would just say that, you know, as Neil said earlier, and I think rightfully so, these the freighter operators, the airlines are going to go where the business is.
And so you know, my.
I think that one of the concerns is that in the past you're right, we were focusing on China, but then we said okay, that's all right because if things go awry in China we can always look to India.
But India's got some challenges right now because if they don't concede to some of Trump's wishes, especially the selling of oil to Russia and dealing with Russia, it's going to cost them dearly and they're not going to be the most likely alternative going forward.
[00:22:59] Speaker C: So.
[00:23:01] Speaker D: We think the capacity will be there. It's just going to be in the areas that are seeing the most productivity, and we have to be ready to go to where those areas are.
[00:23:10] Speaker C: Let's just take a short break here to hear from our sponsor today.
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[email protected] AirCargo welcome back, Neil. People, including yourself. I believe I've talked about the possibility of a looming air cargo recession with a tariffs with de minimis. How, how bad could it get?
[00:24:08] Speaker A: Yeah, it's a, it's a good question, Mike. And you're, you're exactly right, is that I, I think that as these, you know, as we were approaching Liberation Day, remember, in April, I think, and then we saw the, the big announcement.
[00:24:23] Speaker B: Yeah, exactly.
[00:24:24] Speaker A: What a, what a fun day. Right. For everyone.
And then, you know, the press conference and all of that. And, you know, you started to paint a lot of doomsday sort of scenarios in terms of what's going to happen. Right. You know, particularly in our industry, logistics in general, but air freight, you know, specifically. And I think that before I get to sort of whether or not I think there's going to be an air freight recession, I just like to say that I think that, you know, everyone can agree that global trade is good for humanity. It's good for societies around the world. It, it pulls people out of poverty, it allows developing countries to develop further. It creates all sorts of opportunities up and down, you know, sort of the demographic and income vertical. Right. And so we would like to see more trade every year. Now, tariffs are not good for trade. And so, you know, from a purely global macro perspectives, this sort of tariff regime with retaliatory sort of then back and forth is not good for global trade and overall isn't good for society. Right. And over the long term that will play out, I think, negatively in terms of how quickly the world moves forward. That all being said, I don't think we're going to see an air freight recession and I don't think we're going to see a recession because air freight in particular thrives on chaos. Right. Chaos creates opportunity.
And I think all my colleagues have said it today, right. We are in a chaotic time right now. Things change every day. You said if we did this yesterday, we'd already be out of date. Right. And by the time we finish recording this, we might be out of date again. And after Trump meets with Putin, we might be out of date again. Right. And so I think, you know, air freight does thrive on chaos and it because it creates opportunities to attack new lane segments, to develop new products that customers need. And I think that, you know, this industry has learned through all of the prior sort of shocks and chaos that we've dealt with, particularly over the past 10 years, that they've learned how to adapt. And so there are clear winners and losers. Right. But I think as a whole, I think the industry is actually holding up okay.
I don't see an air freight recession. Volumes are definitely, I think overall going to be down year over year, but I don't think sort of significantly enough to say we're in a recession. I think there's some trade lanes are going to suffer a heck of a lot more than others think. China to the U.S.
but there are others that are going to far outperform anything we possibly thought as we headed into 2025. So that's sort of my take on it right now, sort of softening my, my stance a little bit on the recession piece and thinking just going to be a bit of a downturn, but I think the industry overall will be okay over the next several months.
[00:27:20] Speaker C: Well, I'll open this out to everybody. We had, well, I don't know, it was a surprise. There was a 5% spike in air freight demand in July. There was an element of, oh, well, maybe this is front loading ahead of the tariff announcements we were all expecting in August. If it was front loading, then presumably that means we're going to have a weaker peak season than we wouldn't. What's your view? Maybe start with you, Brandon, on where you think the peak season is going to be this year. If it's not going to be recessionary, how does it compare to last year or previous years?
[00:27:54] Speaker D: I think somewhat muted. And what you did, in fact see was a lot of front loading. But there's just A lot of business out there right now.
And so it's hard to pinpoint exactly what we're. Where we're going to see the peak season.
But I would say that generally speaking, you know, it's just the whole summer has been peak so far.
As I go back to saying what I said earlier is that forwarders in our association are busy and whatever is driving it is, you know, it could be a multitude of factors. But I want to go back to what Neil said because I agree he could take my place at the Air Force association tomorrow. Because I got to tell you, that is exactly our message too. You know, we, we, we're, we're bullish on global trade. And maybe Neil and I should go over to the White House and sit down and have a talk at the Oval Office and hopefully maybe they'll listen to us because it does create opportunities. And, you know, the reality is, is that unfortunately there are many here in the United States that have been disenchanted with it. But overall, globally, trade has been beneficial to our, our global economy.
So we have to hope that we don't upset the apple cart that much. But again, I would agree with Neil. Maybe a recession is not going to happen because these airlines and these carriers, they're going to deploy to areas of opportunity. So who's the loser? Maybe the United States.
[00:29:16] Speaker C: Okay, so, so trade, trade is, is a, is a great tool for wealth generation. But maybe in the White House where they are, you have the power. They don't quite see it like that. It's more of a political tool or a tool for all purposes.
A Swiss army knife, perhaps? I think I had someone call it Damien. Are you, are you, are you positive on peak season?
[00:29:38] Speaker B: Well, when you, you know, obviously, as Neil and Brandon both said, there are, there are pockets of opportunity out there. You've got Southeast Asia has been growing well, India, Latin America. And then looking at sectors, the high tech sector, semiconductors, pharma, you know, all of which are great products for air cargo. And also, you know, the chaos that's been caused by all the tariffs. You know, air cargo does thrive through chaos. And with all the front loading, the one thing says, you know, US Trans Pacific, obviously that is a big part of the, you know, it's the biggest air cargo trade lane. And when you've got that new November deadline, you would assume that there'll be people looking to move cargo ahead of that and there'll be a kind of another front loading boost up until then. And then post that date then. Yeah, certainly on the trans specific, you wouldn't expect it to be that great. But yeah, there's other opportunities around the world and it's, you know, several people, several airlines I've spoken to. The, the need to be agile was just becoming so important this year and they're being much more flexible with how they deploy freighter capacity, how they analyze their data to make sure that they're on top of which are the markets where there's opportunities.
So yes, for, for those companies it's just about being as agile as possible.
[00:30:55] Speaker C: Yeah. And I think, you know, it's, these companies are agile but the shippers themselves a lot. It's a lot easier to change an air cargo network than move a factory. And I do feel for someone who's moved to India expecting the US China trade war and now they've got bigger tariffs than if they would stay in, in China or they might have bigger tariffs in the very near future.
We'll see very hard to make long term decisions and, and maybe Brandon and Neil can address that in a moment as we finish up. But I just want to have a look at one more of these, these markets first. Neil, Europe's been dragged into this. Well, it was always in this trade war but we've got a better idea of where it, where it is now. It's sort of a slow walking tariff deal with the EU. So car tariffs are about 27.5%, chips may go up to 100%, farmers in limbo the rest of it somewhere else around about 15%.
What does this mean for that transatlantic air cargo market?
[00:31:52] Speaker B: Yeah, good question.
[00:31:53] Speaker A: I mean if you look at the sectors or the verticals in the transatlantic, it's many of the verticals you just mentioned. Right. It's automotive just in time, automotive components, it's pharmaceuticals, little industrials, light industrials, products like that, some perishable things like that. It's not consumer electronics, it's certainly not a lot of E commerce. Right. Because that's all flowing out of, you know, either China or Southeast Asia. So I think that again it's too early because the EU and US, I don't think they've even inked, you know, the deal yet. I think they have the framework but they're still working towards a definitive document, so to speak. So it remains to be seen exactly how this is going to impact, you know, transatlantic trade. I think that things stay around the 15%. I suspect that it's not going to have too big an impact on volume, but I think that if Automotive stay at 27, 30% things like that, you could start to see some of the supply chain decisions change. Some of the production mix of where they're making components to support different vehicle types and all might start to shift. But I think these decisions cannot be made overnight and they require, require billions of dollars often of reinvestment. Right. In new property, plant and equipment. Well, you're not going to make those decisions based on the whim of one person who may change their mind when they wake up on Monday morning. Right. So I think that there's going to be a little bit of a wait and see attitude here in terms of where does this truly settle out. And then I think you'll see manufacturers and OEMs start to make some maybe more informed decisions. But I think overall, I think the transatlantic trade has been relatively, you know, strong this year. I anticipate it will continue to be for the next several months. As Brandon said repeatedly, if his customers and his constituents are busy, that means the industry's busy because freight forwarders are the glue that hold this whole thing together.
So you know that that's actually bodes well for, you know, the next few months. Let's see what happens.
[00:34:03] Speaker C: And Brandon, we're just sort of tying things up here though. I think last time you were on your view was that US's reputation and the US economy, you've sort of covered this a bit today, could go to the dogs if the White House didn't start working more reasonably with trade partners. Do you feel with the US is being reasonable with this use of tariffs?
Sort of thinking. Not so.
[00:34:30] Speaker D: You know, obviously I don't have the presidency here, but you know, they say when you the rule of holes, when you're digging a hole, stop digging. And in my, you know, from my perspective, I'd say, okay, wait a minute, you know, we're already tarnishing well earned, long standing reputations of goodwill and we need to be more deliberate, more strategic.
I'm not suggesting, and I want to be clear here, I'm not suggesting that we throw tariffs out the window altogether. You need tariffs just in normal trade, but at the levels we're talking about, it's just ridiculous.
So I am bullish that I believe you. Look at the European Union, the United States, they will reconcile the situation and come up with something equitable.
Otherwise we're going to see lots of issues in consumer confidence. Look, we're already seeing consumer confidence hits. I'm going to Europe next week and I've looked at some of the bookings, the planes wide open, coming back from Europe. That means people aren't coming into the United States. They're nervous about that. That means it's less people buying US Products once they're here. I'm very concerned about it. Stop digging the hole. Let's start working this out and let's get on the. On the right track.
[00:35:49] Speaker C: Damien, you're. You're out around the world talking to people for Air cargo News. What would you say is your general impression? Are people holding on and hoping for the best? Or. Or. We've talked today that there are opportunities out there. So what a mixed bag, is it?
[00:36:03] Speaker B: Yeah, exactly that.
Actually, you know, recent conversations with freight orders and airlines, I was, you know, I generally prepare myself for everyone to be quite negative. But as you say, the volumes have actually been holding up okay this year for whatever reason.
But I think there is a bit of concern about the underlying economic trends once those kind of. If you remove the kind of volumes associated with front loading out of the equation.
The other main concern people have had is the sort of uncertainty, and that's been the big feedback I've been getting from freight forwarders and airlines. It's just the uncertainty of this year just has made it so hard to plan and so hard to conduct business in. In the way they have have done in the past. So, yeah, that's probably been more than negativity about volumes. The big concern has just been about the unpredictability of the market.
[00:36:59] Speaker C: Well, uncertainty has been almost the only reliable thing in 2025. I would say, Neil, if you were, as a forwarder or a shipper or a carrier, how would you, how would you suggest those people could plan for the fourth quarter or into next year? Any nuggets of wisdom you can share briefly?
[00:37:14] Speaker A: Yeah, I don't, I don't know if there's any sort of, you know, real nuggets of wisdom or a silver, silver bullet here that will help you plan your fourth quarter. I think the advice that I've always given, you know, from my days, you know, as a chief customer officer at Flexport, is you got to stay close to your customers, you know, because you have to communicate, you know, very effectively, very consistently and a lot more frequently with your customers than you did during sort of normal times.
[00:37:42] Speaker B: Right.
[00:37:43] Speaker A: I don't remember normal times anymore because it seems we went. We went into Covid and then we went into this calamity situation. But I think that you have to communicate with your customers, right, no matter where you are in the value chain. Airlines, talk to your forwarders, you know, forwarders Talk to shippers. You know, shippers are hearing from their own customers what their demand is. I think that that needs to happen very frequently because the one thing we've proven in this industry is we can react. Air freight can react. We have some of the smartest people anywhere in any industry that love the business of moving our cargo around the world. And we're very smart at finding solutions to problems. But you can only react when you know there's a problem. So if you can get in front of that and all, then you know you're going to come up with solutions and not ones that cost 10x the yield that you thought you should be paying. You'll come up with solutions that actually, you know, might work economically as well. And so I think that that's just. It's always been my advice, but I think more so now than ever is, is you just have to stay close to your, stay close to your customers and listen. And you're probably going to have to be as creative as you've ever been, you know, over the next several months, right, to keep your business on track.
[00:38:57] Speaker C: Just a quick one to finish, I think. Have I already said that?
How, what, one prediction each, Something that, that you think will be different in 2020, 26, or if that's too tough, something that you'd like to change about our industry. Do you want to go first, Neil?
[00:39:14] Speaker A: Sure.
And again, thanks for having me. It's been great to be on your podcast again, Mike. I always enjoy this.
[00:39:22] Speaker C: Is that the thing that you Hope happens in 2026, that you don't have to come on again?
[00:39:28] Speaker A: I hope you'd have me on every week.
No, in all seriousness, I think world, look, I mean, I don't think that the, the volatility and the chaos is going to subside in 26, to be honest with you. I, I think we're kicking the can down the road on some things. I think there's going to continue. I think it will subside because I think, you know, a lot of the big announcements and the heavy lifting will be out of the way in 25. I think you'll subside. I think we'll be in a new normal, but we'll start to see the real impacts of this new normal. Right as we head into 26. I don't think we're going to see the impacts right now. What are the inflationary impacts truly going to be right? You know, where are the trade flows truly going to sort of move to as we get a little bit more stability with some of the decision making. The one other thing I'd like to see in 26 and even beyond is I'd like to see sort of the regulators, you know, worldwide come to appreciate our industry more, to support us. I think this industry makes the world spin. It truly does. People don't give us the credit, you know, and this industry, the credit that's due in terms of the impact that it has. Right. And so I'd like to see regulators make it easier for us to do our more work than harder. And this has been sort of on my wish list for years. Right. And I think we've made some progress, but we're still behind the curve. And so I'd just like to see more of that. I know Brandon's always up on at least Capitol Hill, you know, pounding his hand on the table, you know, making sure that air freight gets, gets heard. And I think we just need a lot more of that. We need regulators to respond.
So that's my wish for 2020.
[00:41:08] Speaker C: Well, I'll have to go straight to Brandon there then. What's on your wish list, Brandon?
[00:41:12] Speaker A: Well, you know, I, I gotta tell.
[00:41:14] Speaker D: You because I agree with Theo, but you know, in that the logistics business has never got any street cred. You know, we were the ones that no one paid attention to at the cocktail parties. But we're having a resurgence now, so that's a good thing. The other thing is that my dad used to tell me he got through World War II because he was always told you could stand anything as long as, you know there's an end to it. And I think there, this too shall end in one way or another, and we'll adapt. And I think that's important.
There's a blessing here and I think that that's, that it has brought this whole situation has brought freight forwarders and airlines closer to the customer. We're communicating more now and you have to keep that communication up. And that I think is, is really important.
But, you know, and I predict we're going to be focusing on a lot of other things like airport truck area, cargo congestion. You know, we've got a GAO study that just came out that validates the assertions of the Air Forwarders Association. So we're going to start dealing with that on Capitol Hill. So there's a lot of positive stuff going on, but we're going to have some uncertain times ahead and we need to be ready for them.
[00:42:25] Speaker C: And Damien is your first time on the Freight Buyers Club, and this is your like, drop the mic moment, isn't it. Have you got something brilliant to finish on? Share tips perhaps? What's your forecast?
[00:42:36] Speaker B: Yeah, yeah, I wish I did of mine.
[00:42:38] Speaker A: Yeah.
[00:42:39] Speaker B: Oh, maybe. Maybe that extra run by a Heathrow or maybe that's just too ridiculous, isn't it? I'm dreaming now.
[00:42:46] Speaker A: Dream on.
That's your 2030.
[00:42:51] Speaker B: Yeah, exactly.
Getting ahead of myself there.
No, well, just following on from what Neil said about, you know, everything that's happened this year, the kind of that actually coming to fruition next year, the impact of that coming to fruition, you know, just the way e commerce supply chains are just going to change next year. I think we're just going to see these companies, I think overall e commerce is here today. It's a fundamental change in the way we shop. It's not going to suddenly disappear overnight. I'm not buying something off of Amazon because it's cheaper.
I don't think it is that much cheaper than the high street now. It's because it's convenient, it's easy. I don't have to get in my car and drive it. So E commerce is here to stay. But the way those e commerce goods are moved around the world and where they're moved from, I think, you know, that's going to be a huge change. It's going to start coming to fruition next year and it's probably going to result in more ocean shipping and people and these e commerce platforms storing stuff in warehouses closer to the final market because that's going to be the easiest and cheapest way of doing it. So, yeah, that's going to be an interesting one for the air cargo industry to contend with. But as we've said throughout, this is, you know, air cargo is best when it's in a corner and it's got challenges to take on. So yeah, bring it on.
[00:44:11] Speaker C: I did nicely there because my next episode's on container shipping. So you, you, you finished me off very, very well. Davy and Brett, Brandon Freed and Neil Jones. Y thanks so much for your time and insight today and please do come back soon.
[00:44:24] Speaker D: Thanks for having us.
[00:44:25] Speaker B: Thanks, Mike.
[00:44:25] Speaker A: Yeah, thank you, Mike. It's all pleasure.
[00:44:28] Speaker C: That's it from the Freight Buyers Club. Thanks again to the MSC Air Cargo for supporting this episode and thank you all for watching or listening. Big thanks to Karen Ball and Tom Matthews for all the expertise and if you found this useful, please do hit subscribe, follow the podcast and share it with your your team. Independent journalism in Freight Matters and it only works with your support. I'm Mike King. See you next time.
