United Parcel Service reported a sharp decline in its supply chain division's fourth-quarter revenue as US trade policy shifts continued to weigh on international freight, reports New York's Journal of Commerce.

UPS said revenue in the segment fell 12.7 per cent to US$2.7 billion, driven by lower rates in air and ocean forwarding and reduced parcel volumes to the US Postal Service. Operating income rose 16 per cent, helped by the acquisition of healthcare logistics provider Andlauer and growth in reverse logistics and same-day delivery services.

The company's parcel business also slipped in the quarter, as gains in international operations failed to offset declines in US volumes and revenue.

Chief financial officer Brian Dykes told analysts the company faces "extreme weakness" in international business during the first quarter of 2026, citing higher US tariffs, threats to trade agreements with Canada and Mexico, and the end of tariff-free shipments under the de minimis exemption.

Mr Dykes said UPS is shifting to shipments from other Asian countries to the US, but margins are lower than its China-to-US trade. He added the company expects conditions to improve after May when tariff impacts ease, and again in September when de minimis changes are absorbed.

UPS forecasts high single-digit growth in its supply chain business in 2026, supported by the Andlauer acquisition. However, Mr Dykes cautioned first-quarter revenue will be flat with a year-on-year decline in operating profit due to trade lane changes and tough comparisons with 2025.

Vice president Kathleen Gutmann said UPS is investing outside US trade lanes, including a new air hub in Vietnam now operating at 80 per cent capacity. She noted double-digit growth in shipments from Asia, though most are bound for Europe and India.