Los Angeles – For a symbol of the chaos engulfing world trade since the Trump administration walked into the White House, look no further than a pile of 16,000 tonnes of steel pipes.
Stevedores in Germany should be preparing to load the first batch on a container ship bound for a massive energy project in Louisiana. Instead the cargo is sitting in a German warehouse after Washington proposed puttingmillion-dollar levieson Chineseships docking in the US.
Talks over the terms for shipping the pipes were put on hold until there is more clarity, said MrJose Severin, a business development manager for Mercury Group, the logistics provider for the deal. For that particular route across the Atlantic, 80 per cent of the ship owner’s vessels were built in China, meaning ashipment would be subject to a surcharge of between US$1 million (S$1.3 million) and US$3 million. Depending on how the measure is applied, that could amount to double ortriple the current cost of shipping the steel pipes from Germany.
It is one of countless deals caught in thecrossfire sparked by a proposal fromthe Office of the US Trade Representative(USTR) aimedat curbing China’s dominance of the shipbuilding, logistics and maritime industry.
China now produces more than half of the world’s cargo ships by tonnage, up from just 5 per cent in 1999, according to the USTR, with Japanand South Koreathe other shipbuilding powers. In 2024,US shipyards built just 0.01 per cent, and the USTRhas aneye on reviving the fortunes of the long dormant US merchant shipbuilding industry.
China’s dominance gives it “market power over global supply, pricing, and access”,the USTR said on Feb 21when it unveiled the proposal. In response, theChina State Shipbuilding, which has thelargest order bookof any shipbuilding group in the world,described the measures asa breach of World Trade Organisation rules.
The subject will be at the heart ofa two-day USTR hearing in Washington that begins on March 24.The entire supply chain will be represented, from soya bean growers to shippers to Chinese shipbuilders. Dozens of business owners and trade groups will explain why they fear the proposals would disruptglobal trademore than US President Donald Trump’sapproach to tariffs.
“They see this as more of a threat than the tariffs, because of the impact it’s going to have on the supply chain,” said US National Retail Federation vice-president of supply chains and Customs policy Jonathan Gold.“Carriers have said they’re not only going to pass along the cost, but they’re going to pull out of certain rotations, so the smaller ports, Oakland, maybe Charleston, Delaware, Philly. They’re all going to suffer as a result.”
In letters to the USTR and interviews with Bloomberg News, business owners and industry officials said the proposalsdo not make sense if the goal is to revive thedomestic shipbuilding industry, and would potentially be devastatingfor the US economy. They argue it would makeAmerican goods too expensive internationally, divert trade away from US regional hubs to Canada and Mexico, overwhelm major US ports, and force up global freight ratesand inflation at home.
The levies could theoretically generate between US$40 billion and US$52 billion for US coffers, according to ClarksonsResearch Services, a unit of the world’s largest shipbroker.But,already roiled by uncertainty over the escalating tariffs on Chinese goods, steel and aluminium, and with a fresh round of reciprocal measures expected on April 2, some American companiesand others in the industry are anxious.
“What the USTR has proposed – a backward-looking, retrospective, multimillion-dollar per port call fee – won’t work,”said MrJoe Kramek, chief executive officer of the World Shipping Council, who is set to testify on March 24. “It will only serve to penalise USconsumers, businesses, and especially farmers, raising prices and threatening jobs.”
MrJohn McCown, a veteran of the maritime transportation industry and author of a history of cargo shipping,put it more starkly:“If you wanted to take a sledgehammer to trade this is what you would do. You take it all together – it’s like an apocalypse for trade.”
The USTRprobebegan in 2024 under the Biden administrationafter a request from five major labour unions. The resulting report, delivered just days before Mr Trump was inaugurated in January, determined that China hadtargeted the global maritime sector to dominate it. It left it to the new administrationto come up with ways to address Beijing’s commanding position.
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The imposition of levies and additional export requirements are designed“to create leverage to obtain the elimination of China’s targeting of these sectors for dominance”, according to the initial proposals issued by the USTR on Feb 21.Firms would be penalised using a formula based on their fleet’s existing share of Chinese-built ships, as well as others on order. Some vessels could attract fees of up to US$3.5 millionper port call if they are Chinese-built with a Chinese operator which also has a ship on order from a Chinese manufacturer, according to Clarksons.
An estimated 83 per cent of container ship visitsto the US in 2024would have been hit with fines under the proposed rules,as well as two-thirds of car-carrier calls and nearly a third of crude tankers, according to Clarksons.
The proposalalso requires a share of US products – including agricultural, chemical, energy and consumer goods – to move on US-flagged, crewed, and built ships in coming years.
Many carriers and operators say they would happily buy or hire US-built merchant ships, butthat it would take decades for US shipyards to meet capacity demands and there is already a shortage of American mariners.At the same time, the port fees would punish carriers for investments they’ve already made in Chinese-builtships.
When Atlantic Container Line (ACL), which carries more than half of US exports of construction and agricultural equipment to Europe, needed to source “container-roll-on-roll-off” vessels in 2012, Japanese and Korean shipyards would not build just five of the specialised ships. American shipyards said theywould not be able to deliver themfor at least seven years, wrote its chief executive Andrew Abbott in a submission to the USTR. Instead ACL found ships in China, where they could get the vessels quickly and at a “competitive price”.
“The proposed action will put us out of business for a commercial decision taken 13 years ago,” wrote Mr Abbott of the USTR proposal,“at a time when US shipyards were flush with US Navy orders and could not build our vessels, and when the Chinese shipbuilding industry was a minor player in the world.”
Many of the commenters expressed support for curbing China’s maritime might, while urging the USTR to rethink its approach. There were, however, a handful of comments in support of the proposed measures among the more than 250 submissions.
“China’s unfair production practices have made it impossible for American shipbuilders to compete on an even playing field,”said Mr Scott Paul, president of the Alliance for American Manufacturing, who is scheduled to testify on March 24. “If fully implemented, these remedies will help to restore American economic security, push back against China’s unfair trade practices, and revitalise shipbuilding in America.”
Severalindustry executives believe the proposal islikely to be watered downgiven how disruptive it would be to world trade. Adjustments to the fees and export requirements could certainly be made. They could even be scrapped, given the mercurial character of some administration decisions.Yet, industry lobby groupsinsistthere is good reason to think at least some of this will stick.
The USTR investigationechoes elements ofa bipartisan bill introduced in December to address a shortage of merchant mariners using expanded training programmes and tax incentives for companies looking to invest in US shipbuilding. The USTR proposal also shares some DNA with a draft executive order seen by Bloomberg thatwould funnel tariff or tax revenueto a fund to support the domestic shipbuilding industry.
The draft document Make Shipbuilding Great Again also suggests that the US will pressure other countries to align against China’s maritime dominance, or face retaliation.
If the USTR implements its proposal as written, shipping executives and brokers say agradual split of the market is likely, where China-built ships are treated differently to those constructed elsewhere. In the tanker market whereChina-built vessels make up a third of all ships, it already appears to be happening.Charterers are starting to shy away from leasing China-linked tankers for long-term engagements, according to shipbrokers, because they expect that the vessels will need to call at US ports in the future, exposing them to tariffs.
Shipowners keen to expand their fleet while avoiding the penalties would also find themselves in a bind. Yards are near capacityin South Korea and Japan with the next slot for new ship orders available onlyaround 2028, shipbrokers said. But not acquiring new ships at a time when the age of the global fleet is rising means that they would be stuck with deteriorating vessels.
Mercury Group’s MrSeverin will watch the outcome of theUSTR decision –which is expected in the coming weeks – closely. A lack of domestic supply means those 16,000 tonnes of steel pipes are still needed for the Louisiana project. “It still needs to happen,” he added. BLOOMBERG
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