A proposed set of US levies targeting Chinese-built ships has raised concerns about a potential “trade apocalypse” as it threatens to upend the global shipping industry. Currently, China accounts for more than half of the world’s cargo ship production by tonnage—up from just 5% in 1999, according to the US Trade Representative (USTR). Japan and South Korea are also key shipbuilding nations, but China has grown dominant in the industry, putting pressure on US competitiveness.
One example of the fallout from this proposal involves 16,000 metric tons of steel pipes in a German warehouse, waiting to be shipped to an energy project in Louisiana. Due to the new tariffs, the shipment’s cost could increase by up to $3 million, as most of the ships for this route are Chinese-built. With tariffs of $1 to $3 million per port call, the charges could more than double or triple the cost of transporting goods. Talks between the shipper and logistics provider have been delayed, and the future of the shipment remains uncertain.
This measure is part of a broader US initiative aimed at addressing China’s growing control over the global maritime sector. China’s shipbuilding dominance is seen as giving it significant leverage over global supply chains, pricing, and access. In a report published in February, the USTR stated that China’s market power is undermining global competition and posed a serious threat to the US economy.
The US is contemplating imposing tariffs of up to $3.5 million on Chinese-built ships arriving at American ports, a move that could potentially raise costs for nearly 83% of container ship visits and two-thirds of car-carrier calls. The proposed levies are part of an effort to revive the moribund US shipbuilding industry, which has seen a significant decline in recent years. US shipyards built only 0.01% of the world’s cargo ships in the past year, while China has been rapidly expanding its fleet production capabilities.
This initiative is a response to pressure from major US labor unions, and its aim is to reduce China’s dominance in maritime logistics. However, the measure has sparked significant concern among business leaders, who argue it will severely disrupt supply chains and drive up costs for consumers. Critics contend that the levies would burden US companies, potentially leading to higher shipping costs, the relocation of trade to Canada and Mexico, and job losses, especially in industries reliant on smaller US ports.
Joe Kramek, CEO of the World Shipping Council, stated that the proposal would harm US consumers and businesses, particularly farmers, by raising prices and threatening jobs. Others, like John McCown, a veteran of the shipping industry, compared the policy to “an apocalypse for trade.”
The USTR’s investigation into this matter, which began in response to labor unions’ concerns last year, is now the focus of intense discussions. The two-day hearing in Washington, set to begin on Monday, will involve testimony from industry stakeholders, including shippers, Chinese shipbuilders, and agricultural producers. Some business leaders have argued that the USTR’s plan is unlikely to succeed in its objective of revitalizing the US shipbuilding sector and may only exacerbate current economic challenges.
Some industry executives see the proposal as misguided, pointing to the challenges of reviving US shipyards, many of which face capacity issues and a shortage of skilled workers. Additionally, US businesses that have already made investments in Chinese-built ships, like Atlantic Container Line (ACL), could be penalized for decisions made years ago, when US shipyards were unable to deliver ships on time.
Despite the backlash, some trade groups have expressed support for the US measures, arguing that they could help restore fairness to the maritime industry and push back against China’s unfair trade practices. Scott Paul, president of the Alliance for American Manufacturing, emphasized that the levies could revitalize shipbuilding in the US and address China’s growing influence.
The Biden administration’s approach to revitalizing the US shipbuilding industry has received bipartisan support, and it reflects broader efforts to bolster the country’s maritime capacity. However, as discussions continue, many stakeholders are concerned that the USTR’s proposal may inadvertently harm the very industries it seeks to protect.
In the coming weeks, the USTR will announce its decision, which could have far-reaching consequences for global trade and the future of US maritime policy. With uncertainty hanging over the shipping industry, many businesses are bracing for the potential impacts on supply chains, costs, and global trade dynamics.
