President Trump's administration has proposed new punitive tariffs on international freight transport that would target ships from Chinese companies, promising they would dramatically change global trade.
The new policy foresees a $1 million tariff on Chinese cargo ships, as well as ships flagged by third countries but manufactured in China, when they dock in American ports.
Shipping vessels often make multiple stops when shipping goods to the United States and will face fees at each port.
The Office of the US Trade Representative made the proposal public on Friday, linking it to an investigation into allegations by several US labor unions that China has unfairly influenced the international shipbuilding industry.
The investigation concludes that the Chinese government subsidizes its shipbuilding industry with the aim of "dominating" the global market.
Market expansion
The investigation noted that over the past 25 years, China's share of the global shipbuilding industry has seen a huge increase. China accounted for about 5% of the global shipbuilding market in 1999. By 2023, China's market share was over 50%.
The investigation found that Chinese policy “impairs or restricts United States trade by harming business opportunities and investments in the United States’ maritime, logistics, and shipbuilding sectors. It also restricts competition, jeopardizes economic security, weakens critical sectors of the U.S. economy, and undermines the supply chain.”
The results of the investigation, which began during the administration of President Joe Biden, were released last month.
The proposal is open for public debate until March 24, when the US administration will decide whether to implement it or not.
Chinese reaction
On Monday, Chinese Foreign Ministry spokesman Lin Jian sharply criticized the United States' move.
"To serve its domestic political agenda, the United States abused the Section 301 investigation, seriously violating World Trade Organization rules and further undermining the multilateral trading system," he said. "We call on the US side to respect the facts and multilateral rules and immediately stop the violations."
The China National Shipbuilding Industry Association and the China Shipowners Association had previously criticized the US investigation, saying it was filled with "lies and distortion of facts."
In a statement issued after the investigation results were released, the China National Shipbuilding Industry Association said that "the development of China's shipbuilding industry strictly follows international trade rules and is done in cooperation with global partners, is based on the latest technologies and respects Chinese industry rules."
Complex new rules
The proposal from the Office of the US Trade Representative contains a number of complex elements, which make the administration and implementation of a new tariff regime at US ports unclear.
Any ship owned by a Chinese entity would be penalized with a $1 million fee for entering a United States port, although the proposal also appears to consider a different fee calculation of $1,000 per ton, which could increase significantly for large ships carrying thousands of tons of cargo.
Ships built in China and operated by non-Chinese shipowners would be subject to a $1.5 million tariff, which could vary depending on the number of Chinese ships in an owner's fleet. This would apply even if the ship's cargo did not contain products made in China.
Ships owned by companies that have existing orders for new ships manufactured by Chinese companies could be hit with an additional $1 million fee for docking in US ports.
The rule also provides for a "rebate" of a similar amount whenever a shipping company ships a U.S.-built cargo ship to a U.S. port.
Unclear economic justifications
Mary Lovely, an expert at the Peterson Institute for International Economics, said it is difficult to find an economic justification for the proposal.
"The thing that's really troubling is that the proposal is not tied to any specific policy that would benefit American businesses or consumers," she said.
International trade will continue to flow into the United States, but through more complicated routes that add time and cost. Economist Mary Lovely says many shipping firms would consider diverting their ships to ports in Mexico and Canada, and then transporting their cargo overland to the United States.
“It seems to me that this is a tremendous way to reduce volume and employment at U.S. ports and essentially force trade to rely on road freight, which would increase costs for American businesses and consumers,” says Lovely. “There is no other alternative.”
The President of the World Transport Council echoed these concerns in an email to Voice of America.
"The Office of the U.S. Trade Representative's proposed draconian tariffs of $1 million for docking in U.S. ports of ships that carry the majority of U.S. trade, if they are built or operated by the Chinese, would cause significant economic harm to all sectors of the U.S. supply chain," said Kramek, whose organization represents shipping companies, in an emailed response.
"Tariffs would result in fewer berths at United States ports, higher prices for American consumers, and consequences for exporters, especially American farmers," he wrote.
American shipbuilders unlikely to benefit
While intended to help American shipbuilders, the law is unlikely to have a major impact on the industry, says Marc Levinson, a Washington-based economist and historian who has written two books about shipping goods by large ships.
"This is not likely to have a major impact on the U.S. shipbuilding industry," economist Levinson told VOA. "American commercial shipbuilders are far behind the global scale. They don't produce anything that is competitive in the international market for ocean-going commercial ships."
“The beneficiaries of this policy would be Japan, South Korea, the Philippines and other countries, where commercial shipbuilding is now on a larger scale than in the United States,” Mr. Levinson said. The losers, he added, would include American consumers, as port tariffs would cause the price of imported goods to rise.
In an email to VOA, the National Retail Federation said it has already expressed its opposition to the policy. “The National Retail Federation strongly opposes the port fee decision, which has nothing to do with trying to force China to change its behavior and practices. It would only increase shipping costs for retailers and further harm shipping.”/ VOA (A2 Televizion)
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