UPS and
FedEx Once Handled a Deluge of Packages From China. That’s Changing.
President
Trump has ended a tariff loophole that generated lots of business for delivery
companies shipping inexpensive goods from China to the U.S.
Peter Eavis Niraj Chokshi
By Peter
Eavis and Niraj Chokshi
May 6, 2025,
12:00 a.m. ET
https://www.nytimes.com/2025/05/06/business/trump-tariffs-ups-fedex.html
Less than a
year ago, executives from FedEx and UPS were talking about how they were
handling a flood of packages from China to American consumers.
“Explosive”
is how Carol Tomé, UPS’s chief executive, in July described the volume of
shipments from e-commerce companies selling Chinese goods in the United States.
And FedEx’s chief customer officer, Brie Carere, said about those companies in
June, “No one carrier can serve their entire needs.”
But that
torrent is expected to slow to a trickle after President Trump on Friday closed
a loophole that had allowed cheap goods from China to enter the United States
without paying tariffs.
The business
of transporting hundreds of millions of low-value shipments on as many as 60
freighter flights a day between China and the United States could now wither.
A falloff in
such shipments could deprive companies like UPS, FedEx and DHL of a big source
of revenue. Airlines, mainly those that carry only cargo, and smaller logistics
companies could also suffer. Passenger airlines may also be hurt somewhat
because they carry some of those packages, too.
UPS said
last week that it expected the revenue from shipping packages from China to the
United States — its most profitable trade lane — to decline roughly 25 percent
in the second quarter of this year, from a year earlier. UPS also announced
that it would cut 20,000 jobs this year as part of a long-term plan to reduce
costs, and said “macroeconomic uncertainty” prevented it from updating its
forecasts for revenue and profits for 2025.
Ms. Tomé
said UPS’s China-to-U.S. business was responsible for 11 percent of the
company’s international revenue. She suggested that the company could take the
trade tensions in stride, saying that, when trade between China and the United
States declined during Mr. Trump’s first term, it increased between China and
rest of the world.
But because
Mr. Trump is now waging a more aggressive and broader trade war, logistics
companies may not be able to easily make up for lost sales in other places, as
they were able to during his first term, analysts said.
“It was a
bit of a bumpy ride the last time,” said Jay Cushing, an analyst for Gimme
Credit. “It took a little while for things to level out, but this is probably
going to take even longer.”
The tariffs
that Mr. Trump imposed on Chinese goods during his first term helped set off
the gusher of inexpensive goods from China.
To avoid
those tariffs, Chinese sellers increasingly sent products to the United States
under the loophole that was closed on Friday for imports from mainland China
and Hong Kong.
Known as the
de minimis exemption, the loophole allowed buyers to import goods worth $800 or
less without paying tariffs or filling out detailed customs paperwork. Now that
the exemption is gone, American shoppers will have to pay tariffs of as much as
145 percent on Chinese goods, adding $14.50 to the cost of a $10 T-shirt.
Temu, one of
the biggest e-commerce companies selling Chinese goods, said last week that it
was no longer shipping orders from China directly to American consumers. “All
sales in the U.S. are now handled by locally based sellers, with orders
fulfilled from within the country,” Temu said in a statement.
As the
ending of the exemption loomed, Wall Street analysts pressed delivery companies
to predict the impact.
When asked
on an investor call in March what share of revenue came from de minimis
shipments, FedEx’s chief executive, Raj Subramaniam, said it was a “minority.”
Isabel
Rollison, a FedEx spokeswoman, declined to offer a more precise estimate. “In
terms of our revenue split by geography, we serve an extremely diversified
customer base across more than 220 countries and territories,” she said in a
statement.
DHL, based
in Bonn, Germany, also declined to say to say what percentage of its business
came from de minimis shipments from China. Glennah Ivey-Walker, a DHL
spokeswoman, said they represented “only a small portion of our overall
U.S.-bound volume and our overall business volume in the U.S. market.”
Ending the
exemption might have been worse for the carriers had it not been for a late
change to the rules by the Trump administration.
The
lower-value goods were set to become subject to strict customs rules that
require detailed paperwork. But the administration late last month issued a
waiver that allowed the goods to be treated more leniently.
Some trade
experts said the administration’s change undermined tariff collection because
it deprived Customs and Border Protection of information it needed to make sure
that importers were paying the correct amount of import duties.
“If you
don’t know exactly what the good is, it’s hard to know what the right potential
value is or what the right tariff should be,” said Lori Wallach, director of a
trade program at American Economic Liberties Project, an organization that
seeks to curb the power of large corporations.
But some
customs lawyers said that, even after the waiver, detailed information would
still be required.
The waiver
came after DHL stopped making some shipments that were subject to the paperwork
requirement, and after it had spoken to members of the Trump administration.
Ms.
Ivey-Walker, the DHL spokeswoman, said the waiver would not “make it harder to
collect tariffs or in any way impede the government’s ongoing efforts to
protect its borders.” She added that DHL had spoken to the administration to
highlight the delays that might occur if the detailed paperwork requirement was
enforced.
A sharp
decline in low-value shipments could also shake airlines.
Air cargo
shipments had already slowed even before the end of the exemption on Friday.
By
mid-April, air cargo traffic from mainland China and Hong Kong to the United
States was down about 16 percent from a year earlier, according to WorldACD, an
industry data firm. And experts say that traffic is likely to slow further in
the coming weeks.
“We expect
to see as much as 30 to 40 percent of China-to-U.S. capacity come out of the
market,” said Derek Lossing, the founder of Cirrus Global Advisors, an
e-commerce and supply chain consulting firm.
The carriers
most active in e-commerce trade between China and the United States include two
U.S. cargo airline companies, Atlas Air Worldwide and Kalitta Air; Hong Kong’s
Cathay Pacific Airways; and the cargo divisions of Chinese airlines, according
to several air cargo experts.
U.S.
passenger airlines are not as vulnerable because they operate relatively few
flights between the United States and mainland China and Hong Kong.
To make up
for the losses, Chinese businesses may try to sell more goods to customers
elsewhere, including in Europe, Australia, New Zealand and Latin America,
experts said.
There are
already signs of such a shift. While air cargo shipments from China to the
United States were down in the weeks leading up to the expiration of the
exemption, flights into Miami, a hub for flights to Latin America, were up
slightly, according to Mr. Lossing.
Peter Eavis
reports on the business of moving stuff around the world.
Niraj
Chokshi writes about aviation, rail and other transportation industries.
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