The US Trade Representative (USTR) Proposal announced by the US administration on Friday, which contemplates imposing steep US port fees on Chinese shipping companies & Chinese-built ships, would likely have a sudden and dramatic impact on the US import flow. If approved, the plan will have significant implications for almost all US imports in all shipment sectors.
The plan as detailed would levy an incremental charge on container imports of $1,000 per net tonne - up to $1m for every port call by a Chinese-built ship. Additionally, any ship operator that has (even) a single Chinese-built ship or a single new ship in construction at a Chinese yard could also face a new port fee of $500,000 per call for all of its current vessels. Since container shipping lines typically make multiple port calls per US service loop, carrier charges would quickly add up - typically reaching $2-$3M per crossing.
From even a brief glance at current fleets, it’s clear that the impact these fees could be enormous:
China plays a pivotal role in the construction of the global containership fleet, with a substantial portion of Chinese-build vessels currently operating on U.S. trade routes. Looking only at container vessels calling at U.S. ports, data from IndexBox indicates that about almost 17% of the vessels are Chinese-built -with Chinese shipyards holding approximately 68.5% of the global containership order book (nearly triple that of their main competitor (theloadstar.com).)
Facing changes driven by this plan, Carriers would no doubt try to mitigate the increased cost by accelerating the “bifurcation” of fleets into Chinese and Non-Chinese Fleets, diverting china-built vessels to other marketfs. In a North American context, this might encourage carriers to disproportionately re-direct China-built vessels to Canadian and Mexican ports, resulting in more competition and bigger rate gaps on key trade routes. This re-direction would inherently limit availability of vessels to operate on USA trade lanes, and as - and when - rates drop, this would in turn cause carriers to more quickly blank sailings, or shift capacity disproportionately to other global tradelanes. Such an inefficient re-distribution of existing capacity would no doubt further complicate global supply chains still mired in complexity from the complex political events of 2024.
This change could artificially impact the supply and demand balance, where vessel supply is reduced on key trades into the USA, and would result in higher freight costs that would be passed along to businesses, and then to consumers.
The net effect of this policy may be to meaningfully hinder the Chinese shipbuilding industry, but it seems certain that the net cost of such an aggressive policy will be quickly visible on the bottom line for US Businesses and also in the pockets of US consumers.