FedEx is expected to report a quarterly profit hit when it announces results, stemming from the U.S. government’s decision to end tariff-exempt status for a large category of direct-to-consumer shipments, as reported by Reuters. The policy change, enacted by President Donald Trump, eliminated the “de minimis” exemption that had allowed packages valued under $800 to enter the United States duty-free, a category that previously accounted for roughly 1.4 billion annual shipments.

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The initial removal of the exemption for packages from China and Hong Kong on May 2 impacted FedEx’s fiscal first quarter, which ended August 31. The company’s Chief Financial Officer, John Dietrich, stated the firm anticipated a $170 million financial impact from U.S. tariffs during the quarter, largely from Chinese goods. This represents approximately 0.8% of its overall revenue for the period. The U.S. further extended the elimination of de minimis exemptions to the rest of the world on August 29, meaning the full financial effects are still to come.

According to data from the IndexBox platform, air freight demand has tumbled following the end of the exemptions, a trend projected to continue through the end of the year. This decline coincides with a broader struggle in the transportation industry, which is facing persistently soft demand from manufacturers and other key industrial customers. The policy shift has also created a significant disparity in volume between carriers; rival UPS reported a 34.8% drop in average daily volume during May and June, which it attributed to the end of de minimis treatment for purchases from China-linked e-retailers.

Analysts note that FedEx and UPS handle these shipments differently, which may lead to varied impacts. FedEx has focused on shipping parcels from China to the U.S., largely by air, while UPS is more exposed to e-commerce firms and handles bulk shipments of de minimis packages after they arrive in the country. Despite the challenges, some higher-value goods shipments may prove more resilient, and carriers could capture business previously handled by global postal services that are now scrambling to implement tariff collection systems.

Source: IndexBox Market Intelligence Platform