BUSINESS

End of U.S. Tax Exemption Hits Chinese Air Cargo Carriers Differently

Published: Sep. 1, 2025 4:22 p.m. GMT+8

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Freight arms of China’s ‘big three’ airlines show diverging half-year earnings as they adapt to Washington’s removal of the low-value package exemption. Photo: Air China

Chinese air freight operators are feeling the early shockwaves from Washington’s decision to scrap duty-free treatment for low-value packages, a move that is upending the global e-commerce shipping trade and forcing carriers to rethink routes and products.

The U.S. on Aug. 29 formally ended the so-called T86 exemption globally, which had allowed packages worth under $800 to enter tariff-free. The change comes on top of steep new tariffs on Chinese goods announced in April, threatening to squeeze revenue and margins for airlines heavily exposed to cross-Pacific e-commerce flows, according to Luo Chengtao, an analyst at aviation data platform VariFlight.

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The U.S. ended the T86 exemption on Aug. 29, removing duty-free entry for packages under $800, impacting Chinese e-commerce air freight.
China’s top three cargo airlines saw mixed first-half 2025 results: Eastern Air Logistics’ e-commerce volumes fell markedly, Air China Cargo’s profit jumped after expanding to new markets, and China Southern’s profit declined.
Chinese carriers are shifting capacity to Asia and Europe, opening 117 new cargo routes, as e-commerce previously accounted for 60-70% of China-U.S. air freight.

AI generated, for reference only

Who’s Who

Eastern Air Logistics Co. Ltd.: Eastern Air Logistics Co. Ltd. (601156.SH) experienced a revenue decrease but a slight profit gain. Its cross-border e-commerce parcel volumes dropped 21% in the first half, with tonnage down nearly 30%, attributing this to the U.S. policy shift on duty-free packages. To offset losses, the company increased its fresh-produce shipping and pharmaceutical cold-chain services.

Air China Cargo Co. Ltd.: Air China Cargo Co. Ltd. (001391.SZ), a subsidiary of Air China Ltd., experienced an 86% increase in profit. The company achieved this by expanding into new markets, such as the Middle East. While e-commerce represented under a quarter of its main business revenue, its e-commerce turnover surged by 54%.

Air China Ltd.: Air China Ltd., through its subsidiary Air China Cargo Co. Ltd., saw an 86% profit jump due to expansion into new markets like the Middle East. While e-commerce accounts for less than a quarter of its main business revenue, this segment's turnover surged 54%, driven by increased cooperation with clients and securing long-term orders.

China Southern Air Logistics Co. Ltd.: China Southern Air Logistics Co. Ltd., affiliated with China Southern Airlines Co. Ltd., experienced a 1.8% revenue increase to 9.4 billion yuan, but its net profit decreased by 6.5%. With over 80% of its revenue from international operations, the company is susceptible to fluctuations caused by tariffs.

China Southern Airlines Co. Ltd.: China Southern Airlines Co. Ltd. (600029.SH) saw its cargo unit, China Southern Air Logistics Co. Ltd., report a slight revenue rise (1.8% to 9.4 billion yuan) but a 6.5% decline in net profit. With over 80% of its revenue from international operations, it's susceptible to tariff changes.

Huatai Securities Co. Ltd.: Analysts at Huatai Securities Co. Ltd. (华泰证券股份有限公司) suggest that the immediate effects of "reciprocal tariffs" are lessening. They believe that Chinese cargo carriers can stabilize their operations in the medium term by diversifying their markets and expanding integrated logistics capabilities.

AI generated, for reference only

What Happened When

Late 2024：: Air China Cargo listed on the stock exchange.

First half of 2025：: Eastern Air Logistics’ cross-border e-commerce parcel volumes fell 21% to nearly 26 million orders, tonnage dropped nearly 30%, and e-commerce logistics solutions revenue dropped 27% to 2 billion yuan. Air China Cargo's revenue reached 10.9 billion yuan, up 22% year-on-year, with net profit about 1.2 billion yuan; China Southern Air Logistics posted 9.4 billion yuan in revenue, up 1.8%, with net profit down 6.5%. China opened 117 new air cargo routes, mainly to Asia and Europe.