By Eric Watkins, Guest Columnist
The U.S. shipping industry has given a strong thumbs down to a Trump administration proposal to levy fees on ocean carriers that own Chinese-built vessels and call on U.S. ports. With few exceptions, industry leaders have nixed the ideas proposed by the U.S. Trade Representative, Jamieson Greer.
Greer’s proposals were prompted by a petition initiated during the Joe Biden administration from labor unions, claiming that China uses state subsidies and control over key logistics infrastructure to undercut global competitors and gain an unfair edge, especially in shipbuilding.
China now builds more than 50% of the world’s cargo ships by tonnage — up from just 5% in 1999, according to the USTR. By contrast, due to the unfair subsidies given to Chinese shipyards, U.S. shipbuilders can’t compete and are now relatively dormant, producing only 0.01% of the world’s commercial cargo ships last year.
While labor unions may have initiated the process, the USTR solution is decidedly Trumpian. It aims to revive the country’s shipbuilding, by collecting levies from shipping lines with connections to China’s shipyards and investing the money back into the U.S. industry — effectively making them another set of Trumpian tariffs.
There are three main levies in the USTR proposal. The first one applies to each port call by a Chinese ocean carrier; the second is an assessment based on the percentage of Chinese-built ships in a carrier’s fleet; and the third depends upon the percentage of a carrier’s future orders that have been placed with Chinese shipyards.
The sharpest criticism of the proposal came from 317 trade associations in a letter written on March 24, the first day of a two-day public hearing convened by the USTR. The group acknowledged the importance of the USTR’s aim in revitalizing U.S. shipyards but said the proposed levies would be counter-productive to the broader aims of the administration.
The 317 group cited a recent study by the Trade Partnership Worldwide assessing “probable net economic effects” of the proposed remedies. “Overall, total exports and imports would decline, negatively impacting the US economy at a time when the administration is striving to grow the overall economy and create jobs around the country,” the report said.
The 317 group said that ocean carriers would respond to USTR’s fees by “reducing service” to many U.S. ports to avoid the per-stop levy and could even “divert cargo” to competing ports in Canada and Mexico.
Such moves would likely reduce ocean traffic at many smaller ports, eliminated by shipping lines to avoid the levy on port calls, creating “profound” economic damage — including lost jobs — in some communities.
Job losses from diverted cargo drew the attention of the International Longshore and Warehouse Union, which pointed out that “aggressive strategies of Canadian and Mexican ports” have already resulted in significant diversions of cargo and job losses.
“The Northwest Seaport Alliance found that $56 billion of U.S. imports were diverted to Canada and Mexico, from January to November 2024 alone,” the ILWU wrote. “This was an increase of 7.5 percent in less than a year, demonstrating the significant cargo diversion that is already taking place and impacting American ports and American jobs.”
Although agreeing with the USTR’s aim of protecting American interests, the ILWU said “USTR’s measures must be strategically implemented to avoid unintended harm to U.S. workers, supply chains, and to effectively counter China’s efforts to dominate global shipping.”
At the same time, eliminating smaller ports from the normal routes of ocean carrier lines would likely result in greater numbers of ships and cargo heading toward the nation’s larger ports — such as Los Angeles and Long Beach — creating unwanted problems of congestion, with knock-on effects along the supply chain.
“Reduction in service will increase congestion across the country’s logistics network and spur a new normal of higher costs and delays affecting both imports and exports,” the group of 317 said in its letter. “American consumers will suffer a lag in receiving the goods they rely on every day.”
While the USTR’s proposals have sounded alarm bells up and down the shipping industry, some observers feel it is too soon to jump to conclusions about potential outcomes — especially since no date has been designated for the USTR’s final decision.
Matt Cox, chief executive of the Matson shipping line, a U.S.-owned and operated transportation services company headquartered in Honolulu, Hawaii, spelled out the implications for his firm, which operates a fleet of 30 vessels in the transpacific trade and could face substantial levies on several of the ships it operates.
“Matson has a fleet of 30 vessels,” Cox said on a recent earnings call, pointing out that three of those vessels are chartered foreign Chinese-built ships that operate in the company’s Asia Express service, which calls in at Long Beach, while a fourth Chinese-built vessel operates in its South Pacific service.
“So, we have four vessels out of a total of 30 that are manufactured in China,” he said, adding that the company also has three new vessels under construction in the U.S., but none in China. In a word, Matson could be hit with levies on the four Chinese-built ships it operates.
But Cox was not ready to be drawn on the possible consequences of the USTR fees. “We see this USTR proposal as the next step in a discussion that it’s going to have with China. There may be others that follow, but it’s all to set a stage to be consistent with President Trump’s efforts to try to reset trade balances.”
Summing up, Cox said “I think it’s really, these are opening salvos. We’re in the early innings. We could use different analogies, but we’re watching this closely.”
Scott Taylor, CEO and chairman of the board at Oakland-based GSC Logistics, Inc., who acknowledged that the levies could be “concerning” for ports around the nation, said he is “glad that we’ve got such support from the 317 trade associations.”
At the same time, Taylor likewise referred to the USTR gambit as “early innings” with more yet to come. “You know, I think everything Trump does is a negotiation, and this is the opening salvo. I don’t know if we understand the full ramifications of this yet.”
In fact, even as RLN went to press, rumors already were circulating that USTR Greer — whose final decision has yet to come — is now considering a move to eliminate the per-stop levy against Chinese ocean carriers, replacing it with a single charge regardless of the number of U.S. ports a ship calls on per voyage.
Early innings, indeed.
Eric Watkins is a Southern California writer specializing in supply chain issues. He can be reached via email at eric@hippalusandco.com