The decision by the U.S. to terminate a tax-free exemption for low-value goods from China has led to a drop in air cargo shipments from Asia to North America.

What Happened: The International Air Transport Association (IATA) reported a 10.7% decrease in air cargo demand from Asia to North America in May compared to the same period last year. According to a Reuters report, this decline is attributed to the U.S. decision to end the tax-free exemption for low-value packages from China in early May.

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Shipments valued under $800, commonly sent by air to U.S. customers of low-cost e-commerce platforms such as Shein and PDD‘s (NASDAQ:PDD) Temu, were previously exempt from taxes. However, since May 2, these shipments from China and Hong Kong have been subjected to taxes, initially as high as 145%, before settling to as low as 30% after a mid-May trade deal between the U.S. and China.

Why It Matters: This development comes on the heels of a series of trade policy changes by the U.S. government. In May, President Donald Trump significantly reduced tariffs on Chinese imports as the United States entered a 90-day period of trade negotiations with China. 

However, the US’s decision to end the tax-free loophole for low-value goods from China comes at a time of heightened trade tensions between the two countries.

Trump recently announced a trade deal with Vietnam, imposing a 20% tariff on Vietnamese exports to the US and a 40% tariff on goods transshipped through Vietnam, particularly targeting Chinese products rerouted to avoid US tariffs. This move has been met with criticism, with economist Peter Schiff warning that American consumers are likely to bear the brunt of the agreement.

Amid ongoing trade negotiations between the U.S. and China, the recent trade policy shifts by the U.S. are expected to have an impact on global trade dynamics and the performance of key industries.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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