FedEx is bracing for a quarterly profit hit after the U.S. ended tariff-free treatment for low-value international shipments, a move that directly impacts global e-commerce flows. The delivery giant’s fiscal first quarter, which ended August 31, reflects the effects of the May 2 removal of “de minimis” exemptions on goods from China and Hong Kong. These accounted for about three-quarters of the 1.4 billion annual duty-free packages previously entering the U.S. under the $800 threshold. The exemption ended worldwide on August 29, signaling further financial headwinds ahead.
Analysts highlight that investor focus remains on quantifying the impact of the policy change, which could weigh on FedEx’s performance. The company’s Chief Financial Officer John Dietrich estimated a $170 million hit from tariffs in the recent quarter, primarily on Chinese imports—equal to about 0.8% of revenue.
FedEx rival UPS reported a 34.8% drop in daily volume earlier this year due to the policy change, underscoring industry-wide challenges. Unlike UPS, which is more exposed to e-commerce firms like Temu and Shein, FedEx has leaned on air freight from China. The end of tariff exemptions, however, has sharply reduced air freight demand, which typically rises during the holiday shopping season.
Shares of FedEx have traded between $194 and $308 over the past year, reflecting volatility tied to U.S. trade policies. On Tuesday, the stock closed at nearly $228, up 0.9%. While high-end purchases may continue to flow despite tariffs, analysts note the industry still faces soft demand from manufacturers and industrial clients. With new tariff collection systems in place, FedEx and UPS may eventually capture shipments once routed through postal services, but near-term revenue pressure appears unavoidable.
