Breaking Down the 2025 Rate Increases

Carriers are adjusting rates to address rising operational costs, inflation, and surging e-commerce demand. USPS is driving a lot of additional increases outside of standard annual general rate increases. Increases affect their partnerships with UPS, FedEx, and DHL as a last mile carrier for many of their service levels as they adjust business practices to move to a profitable model, while trying to increase business.

Here’s a detailed look at the changes:

• USPS (Shipping Services): The USPS announced on May 9, 2025, that effective July 13th, 2025, shipping rates will increase: USPS Ground Advantage by 7.1%, Priority Mail Service by 6.3%, and Parcel Select by 7.6%. Additionally, peak season surcharges, in effect from October 6, 2024, raise holiday shipping costs, compounding expenses for businesses.
• UPS: A 5.9% general rate increase for ground, air, and international services began December 23, 2024. Surcharges, like Delivery Area Surcharge (up to 69.4%) and a new 2% credit card surcharge (October 26, 2024), drive higher effective costs. Large Package and Additional Handling charges shift to new calculations on January 27, 2025.
• UPS Mail Innovations (UPSMI): An unexpected 25+% ounce-rate increase hit January 2, 2025, followed by 25-40% hikes on both ounce and heavyweight rates (1-5 pounds) on May 4, 2025. Fuel surcharges rose, as well as new delivery area surcharge for select zip codes. Both rate increases were sent with no prior notice, effective with a week or less.
• DHL has remained the most competitive throughout the series of increases in their DHL Ecommerce SmartParcel carrier options (Domestic). A 5.9% average increase for express services took effect January 19, 2025.

These hikes, particularly USPS’s Parcel Select and UPSMI’s steep increases, significantly impact e-commerce fulfillment. For example, the 9.2% Parcel Select increase directly triggered UPSMI’s 25-40% adjustments, as UPSMI relies on USPS for final-mile delivery. Similarly, UPS SurePost faced a 10% hike for lightweight packages and 61% surcharge increases on January 13, 2025.

Why Are Rates Rising?

Several factors drive these increases: 

• Operational Costs: Labor, fuel, and infrastructure investments (e.g., USPS’s $40 billion modernization; UPS’s automation) necessitate higher rates.
• E-commerce Demand: Holiday volume spikes and sustained online shopping growth strains last-mile delivery capacity, prompting peak surcharges.
• USPS Financial Pressures: A $9.5 billion loss in 2024 pushes USPS to raise rates under its Delivering for America plan, especially for competitive services like Ground Advantage.
• Market Alignment: UPS, DHL, and FedEx’s synchronized 5.9% increases reflect industry-standard pricing, while USPS aims to stay competitive.

X posts from @SupplyChainDive and @Zenventory highlight supply chain frustration, with UPSMI’s 40% hikes called “alarming.” E-commerce sellers also express discontent with DHL’s perceived increases, with some switching to alternatives like Express Mail Service (EMS).

Strategies for Effective Shipping Rate Management

To navigate these hikes, businesses must adopt proactive shipping rate management:

• Monitor Carrier Updates: Daily tracking of rate changes, like Falcon’s shift to DHL SmartParcel for UPSMI ounce rates in January 2025, mitigates cost spikes.
• Optimize Carrier Selection: Leveraging carrier selection and management ensures cost-effective shipping and delivery. Falcon moved heavyweight UPSMI shipments to DHL in May 2025, matching original rates.
• Negotiate Rates: Continuous freight rate negotiation secures competitive pricing, as Falcon does.

Looking ahead, 2026 may bring further increases: USPS (6-7.5%), DHL (4-6%), and
UPS/FedEx (5.9-7.5%), per Falcon’s projections. Staying agile is key.