After an 18-month reduction in Amazon volumes and a year of tariff-driven turbulence, UPS has reported that its China-to-U.S. air freight lane returned to year-over-year growth starting in May. The turnaround marks a significant inflection point for the parcel giant, which is now betting on higher-margin volumes, automation, and a leaner relationship with its largest former customer to drive profitability. Main Developments UPS chief financial officer Brian Dykes confirmed on the company's earnings call that the China-to-U.S. trade lane returned to growth in May, lapping the elimination of the de minimis duty-free exemption that took effect in the same month a year earlier. The company did not disclose a specific growth figure, but the improvement aligns with broader industry data: the International Air Transport Association reported 19.9% year-over-year air cargo demand growth on that trade lane in May. China's export numbers to the U.S. surged 35.4% to $39 billion in May, the strongest annual increase since early 2021, followed by a more tempered 13.8% rise in June to $43.5 billion. The rebound comes after last year's "Liberation Day" tariffs and the end of the de minimis provision briefly collapsed trans-Pacific air freight volumes. Read also: Why Rachel Scott's Proenza Schouler Debut Signals a New Retail Era In the second quarter, UPS reported revenue of $22.8 billion, up 7.6% year-over-year, and adjusted operating profit of $2.1 billion, a 12% increase. Adjusted operating margin reached 9.2%, up 40 basis points from a year ago and 300 basis points from the first quarter of 2026. The company raised its full-year guidance: consolidated revenue is now expected at approximately $91.2 billion, up from $89.7 billion, with consolidated operating profit of roughly $8.65 billion, implying diluted earnings per share of about $7.22. Background UPS spent 18 months executing a "glide-down" of packages delivered for Amazon, reducing the e-commerce giant's share of its revenue from a peak of over 13% during the COVID-era e-commerce boom to 9% in the second quarter of 2026. The drawdown removed approximately $4.5 billion in related expenses, with more savings expected by year-end. The reduction was part of a broader strategy to pivot toward higher-margin business customers and freight volumes, rather than relying on low-margin e-commerce delivery for Amazon. CEO Carol Tomé emphasized that Amazon remains an important partner, but the relationship is now structurally different. The trans-Pacific trade lane faced a severe contraction in 2025 after the U.S. imposed tariffs on trade partners and ended the de minimis exemption, which had allowed low-value Chinese goods to enter duty-free. The weaker year-ago volumes made the May rebound more pronounced. Why It Matters The return to growth on the China-to-U.S. trade lane signals that higher-value air trade flows are compensating for the structural shift away from de minimis shipments. For UPS, this means a more profitable mix of cargo, aligned with its strategy of focusing on business-to-business and premium services. The Amazon drawdown, while initially painful, has allowed UPS to slim down its network and invest heavily in automation. By the end of the second quarter, 68.5% of U.S. volume flowed through automated buildings, up from 64% a year ago. Cost per piece in an automated facility is about 28% lower than in a non-automated one, giving UPS flexibility to scale capacity up or down as demand fluctuates. CFO Brian Dykes noted that the automated hubs enable the company to adjust throughput more quickly than conventional hubs, not just month-to-month but day-to-day and week-to-week. This agility is critical as UPS navigates a more manageable peak season with a more stable customer base. RFID technology is another key lever. Tomé described it as "the most significant package visibility advancement in a decade," covering more than 2.2 million packages per day. The system is moving from a scanning-based network to a sensing network, eliminating hundreds of millions of manual scans annually across all U.S. delivery facilities and package cars, with international expansion underway. What's Next UPS expects volume growth excluding Amazon in the second half of 2026 across all segments. However, when incorporating the remaining glide-down, average daily volume in the third quarter is expected to decline by mid-single digits. The company will continue to deepen its automation and RFID deployments, both domestically and internationally, as part of its larger cost-cutting initiative. The $4.5 billion in Amazon-related expense reductions already achieved is expected to grow further by year-end. Whether the China-to-U.S. trade lane rebound can sustain momentum through the rest of the year remains an open question, particularly as tariff policy and geopolitical tensions continue to evolve. UPS's ability to maintain higher margins while scaling down Amazon volumes will be a key test of i