www.fastcompany.com
Donald Trump could be about to escalate the trade war with China. A proposal, unveiled Friday, would slap fees on any Chinese-built vessels, as well as Chinese shipping companies, that enter U.S. ports.That could bring in millions of dollars to the government, but just like the 10% tariffs on Chinese goods Trump has imposed, that move would likely result in even higher prices for consumers (as well as possible retribution from China on U.S. imports).The fees are unprecedented and are meant to chip away at Chinas dominance in the shipping space. In 2023, more than half the worlds commercial ships were built in China and many large U.S. retailers depend on the country for goods.Nothing has been finalized yet, but with consumers still trying to figure out how much tariffs will increase their day-to-day expenses, this adds another layer of financial concern. Heres where things stand now.What is the Trump administration proposing?The Office of the United States Trade Representative is proposing fees of up to $1.5 million per port call for Chinese-made vessels. The fleets of most shipping companies typically contain Chinese-made ships, given that countrys widespread reach in the industry.Shipping companies with fleets that have 50% or more Chinese-built vessels would face fees of up to $1 million per U.S. port call. Operators with fleets comprised of 25% to 50% Chinese-built vessels would pay up to $750,000 per call. For operators with a fleet that has 25% or fewer Chinese-made ships, the fee would be $500,000 per call.Making stops at multiple ports, which many ships do, could result in multiple port fees.Virtually all international shipping companies would be somewhat affected. The largest would likely be Cosco, a Chinese company thats the worlds biggest shipping company in terms of capacity.When would these fees go into effect?The proposal is currently in a public comment period through March 24. Once that has closed, the administration will decide whether to implement the new fees.Why is the Trump administration considering imposing port fees?The potential fees come following an investigation that began during the Biden administration, looking into whether China was involved in unfair practices in the logistics and shipbuilding industries. On January 17, the U.S. Trade Representative issued a finding that called Chinas targeting of the sector unreasonable, adding Beijings targeted dominance of these sectors undermines fair, market-oriented competition, increases economic security risks, and is the greatest barrier to revitalization of U.S. industries, as well as the communities that rely on them.How much would this impact shipping costs?The increased cost for maritime shipping companies could be substantial. Lars Jensen, CEO of Demark-based Vespucci Maritime, which advises shipping companies, tells the Wall Street Journal that container ship costs will increase tenfold.That comes on top of the cost surges of the past several months. Last July, the cost to ship a 40-foot container of products from Shanghai to New York jumped as high as $10,000. Those have since eased back, with the Drewry World Container Index now putting the price at $5,126 for the week ending February 20 (which is still considerably higher than pre-pandemic rates).Why dont companies use U.S.-built commercial ships?There really arent many commercial shipbuilders in the U.S. China is, by far, the market leader for that category (an area once dominated by Western nations). Ships that arent built in China, which accounts for 51% of the shipbuilding industry, generally come from South Korea (26%) or Japan (14%). Europe accounts for 5% of the total.The U.S. shipbuilders that are still around largely focus on making ships for the U.S. Navy and have struggled to find workers.How much will the port fees impact retail prices?The ultimate impact port fees will have on retail prices will depend on how this proposal unfolds. Port fees, however, are generally passed down from carriers to shippers (generally retail businesses), which ultimately pass along the cost to consumers.As far as which industries and products would be affected, its likely to be a wide swath. This would be essentially a tax on many imported goods, regardless of their point of origin. Manufacturing is likely to be heavily impacted, as are automakers and consumer electronic companies and, basically, any business that relies heavily on global supply chains.Retailers that sell items including apparel, shoes, toys, furniture, electronics, and household appliances are also likely to feel the impact of port fees. Grocery stores may, as well, since so many food products come from other countries.
