Markets were volatile and fractious in March – not surprisingly given the outlook for higher tariffs in the United States, risks of retaliation from elsewhere, and the potential disruption to global trade and growth. Indeed, the US stock market completed its worst quarter for three years, with the S&P500 index sliding -4.6%.

Nevertheless, global air freight rates were stronger again over the last month according to the latest data recorded by TAC Index. The global Baltic Air Freight Index (BAI00) calculated by TAC gained +7.1% over the four weeks to 31 March to leave it up a solid +5.1% year on year (YoY).

This was an impressively strong performance compared with last year when air freight rates were surging due to the boom in e-commerce. Over the last year to 28 March, jet fuel prices also fell an average of -7.8%, according to data from Platts. Higher rates combined with lower fuel costs should thus be boosting margins for carriers.

The overall trend was led again by rising rates out of China, both to the US and to Europe. The index of outbound routes from Hong Kong (BAI30) – the biggest airport in the world by cargo volume – gained +6.3% over four weeks to 31 March, leaving it still narrowly ahead by +1.4% above last year’s high level. Outbound Shanghai (BAI80) did even better, with a gain of +11.9% month-on-month (MoM) to leave it ahead by +3.4% YoY.

The overall trend was led again by rising rates out of China, both to the US and to Europe. The index of outbound routes from Hong Kong (BAI30) – the biggest airport in the world by cargo volume – gained +6.3% over four weeks to 31 March, leaving it still narrowly ahead by +1.4% above last year’s high level. Outbound Shanghai (BAI80) did even better, with a gain of +11.9% month-on-month (MoM) to leave it ahead by +3.4% YoY.

Rates out of Europe also enjoyed a mostly solid month. The index of outbound routes from Frankfurt (BAI20) gained +8.2% MoM to leave it ahead by an impressive +28.3% YoY.

Outbound London (BAI40) did worse in comparison, but after a big drop mid-month, it recovered well to end March down just -0.1% MoM and ahead by +2.6% YoY.

Out of the Americas, rates were more mixed with the index of outbound routes from Chicago (BAI50) ending lower by -5.9% MoM, although still narrowly ahead by +1.1% YoY.

 

Sources largely agreed about the main reason rates were rising overall, particularly in the last two or three weeks of the month – the primary driver being impending tariffs that will be imposed in the US after 2 April.

The new Trump administration had already moved to introduce tariffs on certain key commodities, such as steel and aluminium, as well as on certain key trading partners with which the US runs large deficits – notably Mexico, Canada, and China.

From 2 April, market participants were also anticipating the introduction of US tariffs across the board affecting all goods globally, as well as the potential for so-called ‘reciprocal tariffs’ in response to other non-tariff barriers like VAT – notwithstanding the fact many US states also impose such sales taxes. 

All of this led to shippers rushing to move more products more quickly ahead of 2 April. Some anticipate that trade volumes could get hit and rates will then fall as a result of the new tariffs. Some sources said spot rates already started to soften on 1 April, although whether that pattern continues remains to be seen.

All of this led to shippers rushing to move more products more quickly ahead of 2 April. Some anticipate that trade volumes could get hit, and rates will then fall as a result of the new tariffs. Some sources said spot rates already started to soften on 1 April, although whether that pattern continues remains to be seen.

 

Looking ahead, perhaps the key issue market participants are grappling with is sheer uncertainty.

The erratic pattern of on-again, off-again announcements about tariffs coming out of the White House clearly seems to be a negotiating tactic aimed at keeping trade partners off-balance.

But this has also at times looked chaotic – with the new administration having to reverse tack more than once due to complexities in the supply chain it had not foreseen, such as within the auto sector.

All of this has also made it more difficult for market participants – including airlines, forwarders, and shippers – to plan ahead with confidence. That is also before taking into account the potential responses of other trading partners – and all the uncertainties about that.

In the meantime, a more pessimistic mood about the global economy has taken hold – with expectations of US growth falling and euphoria around opportunities related to investing in artificial intelligence (AI) punctured by developments involving first DeepSeek and then Alibaba out of China.

Against that, the European market has been lifted by developments following the election of Friedrich Merz as the new Chancellor of Germany and plans to loosen fiscal rules in order to massively boost defence spending. Unlike the US, European equity markets were mostly up in the first quarter – led by the German DAX index, which gained well over +10% in Q1.

 

All of that said, some market developments appear to be secular trends with such momentum that they will continue regardless – if perhaps in different ways – whether or not tariffs and other trade barriers impact costs.

Foremost among these remains e-commerce, which is still rising globally,  as sector specialist Brinkley Chan outlined at the recent TAC Innovation dinner held in Hong Kong in late March.

While China currently enjoys a massive advantage on costs in e-commerce, any erosion of that – due to tariffs and other policy changes – may well lead to the movement of production to other regions such as Europe and Southeast Asia, Chan noted. As a result, that could also affect the level of freight activity – perhaps as soon as May or June.

The TAC dinner in Hong Kong also featured a timely contribution from Jin Yu Cheong, Baltic Exchange head in Asia, who outlined, among other things, the key importance of data and risk management tools – such as those provided by TAC and Baltic Exchange– especially in turbulent times.

Neil Wilson, TAC Editor

Neil Wilson is Editor of TAC Index, which provides independent, accurate and actionable global air freight data, allowing our customers to make comparative, cost-effective and intelligent air freight decisions.

Neil has more than 30 years’ experience in financial journalism and publishing, specialising mainly in derivatives and alternative investments. He has contributed to various publications including The Financial Times, The Economist and Risk magazine. He has also been a guest speaker at many industry events.

Neil has a B.A. with Honours in Philosophy, Politics and Economics from the University of Oxford.

 

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