Trade Policy Shocks Hit FedEx Shares and Profit Forecast

FedEx’s share price fell sharply after the logistics giant issued a profit forecast below Wall Street expectations, citing the impact of US tariffs and President Donald Trump’s recent trade policy changes. The company faces direct headwinds from the end of duty-free status for consumer shipments under $800 from China, a move that has disrupted the flow of goods from major e-commerce platforms and raised costs for FedEx’s core express and ground divisions.

As the global demand environment remains volatile, FedEx’s ability to adapt will be tested by both shifting regulations and unpredictable trade flows.

Demand Weakness and Economic Uncertainty Cloud Outlook

CEO Raj Subramaniam acknowledged that FedEx is operating in a “volatile” environment, with demand signals weakening across all major business lines. The company’s decision not to provide a full-year earnings or revenue forecast has heightened market anxiety, with analysts warning that FedEx’s caution could be a broader signal of economic fragility.

The company’s exposure to China, more significant than that of rival UPS, leaves it particularly sensitive to further escalation in US-China trade tensions.

Did you know?
FedEx is often called the “economy’s Fitbit” because its diverse business lines provide early insights into shifts in consumer demand, e-commerce trends, and industrial activity across the globe.

Cost Cuts and Margin Gains Offer Some Resilience

Despite the challenging outlook, FedEx managed to deliver better-than-expected profit for the quarter ending May 31, thanks to aggressive cost-cutting and improved export volumes. Operating margins improved, reflecting management’s focus on efficiency even as revenue growth stalled.

However, analysts at Hargreaves Lansdown and AJ Bell cautioned that ongoing trade unpredictability and sluggish demand could limit the benefits of these internal improvements.

ALSO READ | Tencent Music’s Super VIP subscription fuels record-breaking quarterly revenues

Tariff Policy and Direct-to-Consumer E-commerce Hit Hard

The most immediate blow to FedEx’s business comes from the Trump administration’s decision to revoke duty-free status for direct-to-consumer shipments from China, affecting popular platforms like Temu and Shein. This policy change, combined with a fluctuating tariff rate that peaked at 145% before settling at 30%, has disrupted air trade transit and increased costs for FedEx’s customers.

Executives warn that these headwinds are likely to persist as trade policy remains a moving target.

Market Response and Broader Implications

FedEx shares dropped 6% in premarket trading, with rival UPS and Germany’s DHL also seeing declines. The market’s reaction reflects concern not only about FedEx’s prospects but about the health of global trade and the logistics sector as a whole.

As an economic bellwether, FedEx’s struggles may foreshadow broader challenges for supply chains and international commerce if trade tensions continue to escalate.