Container shipping industry faces biggest hit from US plan to charge fees on ships built in China

The container shipping industry could be hit hardest by the US plan to impose fees on ships built in China, raising shipping costs and disrupting global supply chains.

Port of Los Angeles, US (Source: Mario Tama)

The shipping industry is reeling from one of the most far-reaching decisions in the first weeks of President Donald Trump's second term.

The US president is expected to make a decision, possibly in the next month, on whether to implement recommendations from the Office of the US Trade Representative (USTR). The recommendations stem from a year-long investigation into China's growing dominance in the maritime sector, particularly shipbuilding.

The USTR report makes a series of accusations against Beijing, including that China keeps labor costs artificially low, forces technology transfers, and violates intellectual property rights.

The agency proposes imposing fees of up to $1.5 million per port call for Chinese-built ships, $1 million per port call for operators of Chinese-built ships, and mandatory requirements for shipping on U.S.-flagged vessels. The deadline for public comment is March 24, after which the president will make a final decision.

Most ships would be subject to the maximum fees based on net tonnage, according to an analysis by investment bank Jefferies.

“These fees would likely require re-organizing fleet patterns and make US calls more lucrative on a freight rate basis, which operators would aim to pass on,” Jefferies said.

The hardest hit industry could be container shipping, as container ships typically make multiple port stops. Jefferies calculates that a $1.5 million fee, if spread across an average 10,000-TEU container ship calling at a U.S. port, would cost $150 per TEU or $300 per FEU. That could push freight rates on the China-Los Angeles route from $3,000 per FEU to $3,300 per FEU. A VLCC cargo of crude oil from the U.S. Gulf to China currently costs $8.3 million, or $4.20 per barrel, but adding the $1.5 million fee would increase the cost to $4.95 per barrel.

If Trump approves the USTR measures, Dutch bank ING said the ripple effects would affect global supply chains, investor confidence and international relations, causing further uncertainty as businesses face a prolonged period of low reliability, potential new disruptions and rising costs.

Since the turn of the 21st century, China has become the dominant power in shipbuilding, increasing its share from less than 10% of global orders to two-thirds by the end of last year. The US, meanwhile, holds just 1%.

The US is looking to work with South Korean and Japanese shipbuilders to revive its shipbuilding industry, while one of Trump's first moves upon returning to the White House was to impose a 10% import tariff on goods from China.

Commenting on the USTR recommendation, a spokesperson for China’s Ministry of Commerce in Beijing said: “The US measures will not only fail to revitalise its shipbuilding industry but will also raise shipping costs on related routes, exacerbate its domestic inflation, reduce the global competitiveness of US goods, and hurt the interests of its port operators and dockworkers.”

In the five weeks since Trump returned to the White House, he has disrupted world trade with a series of decisions, including imposing tariffs, pushing for peace in Ukraine, increasing maximum pressure on Iran, and establishing the National Council for Energy Dominance. For the shipping industry, implementing the USTR recommendations – a move that is popular with US unions – may be the most disruptive decision yet.

“As the Trump 2.0 reality show unfolds, as it does daily, often with singular market-moving tweets, we might as well suspend trying to make credible forecasts of future supply-demand balance across shipping sectors. Underwhelming spot earnings render shipping sentiment downbeat while we seek greater clarity on today’s geopolitical, trade and social threats,” a recent report from brokerage Hartland Shipping noted.

See more: