Saying it needs to counter China’s unfair support for ship builders, the U.S. Trade Representative (USTR) announced a proposal to charge Chinese-built or Chinese-flagged vessels up to $1.5 million for entering U.S. ports.
The effort, which would be discussed at a March 24 public hearing is part of an imitative to encourage U.S. shipbuilding that was introduced by U.S. President Donald Trump during his March 4 speech in Congress.
“I’m announcing tonight that we will create a new office of shipbuilding in the White House and offer special tax incentives to bring this industry home to America where it belongs,” Trump told Congress “We used to make so many ships, we don’t make them anymore very much.”
Shipping experts note the fees for Chinese vessels and other measures in the USTR proposal could add substantial costs to imports from China and may be unworkable.
Coming on top of U.S. tariffs against China, Canada, and Mexico, the measures are part of a White House campaign to promote domestic U.S. manufacturing and address trade imbalances. Collectively, these actions could have substantial impacts on global trade and shipping.
A response to China’s dominance in ship building
The USTR will take public comments until the March 24 hearing on the proposal, which it says is a response to China’s unfair support for its shipbuilding industry.
A USTR investigation detailed the rise of China’s global shipbuilding market share, from 5% in 1999 to over 50% in 2023, through state subsidies and preferential treatment for state-owned enterprises.
The proposal outlines a structured system of fees on ships unloading at American ports. Chinese maritime transport operators, such as the state-owned China Ocean Shipping Co., would face port entrance fees of up to $1 million per vessel or $1,000 per net ton of a vessel’s cargo capacity, according to JD Supra.
Non-Chinese operators would also be affected by the proposal. Those using Chinese-built ships would pay up to $1.5 million per port entry. Companies with fleets comprising more than 50% Chinese-built vessels would pay $1 million per vessel entry regardless of origin, with fees decreasing to $750,000 if the Chinese fleet percentage was between 25% and 50% and to $500,000 if under 25%, according to Reuters.
Export requirements and domestic shipping provisions
The proposal extends beyond existing fleets to include future orders. A second set of fees in similar amounts would apply to maritime operators with vessels on order from Chinese shipyards scheduled for delivery over the next two years, Oils & Fats International explained.
In an incentive for domestic shipbuilding, the USTR reportedly said fees could be refunded by up to $1 million per entry into a U.S. port by a U.S.-built vessel employed in international maritime services.
The USTR proposal also includes a controversial requirement to ship U.S. exports on American vessels. Initially, at least 1% of U.S. exports would need to be transported on U.S.-flagged vessels, increasing to 3% after two years and 5% after three years, Thompson Hine reported. At the seven-year mark, U.S.-flagged vessels would need to transport at least 15% of U.S. goods, with 5% specifically being American-built ships.
Industry perspectives on financial impact and feasibility
Industry experts expressed serious concerns about both the financial impact and practicality of these measures. Ryan Petersen, chief executive of global logistics company Flexport, told The New York Times that major carriers typically stop at multiple American ports per route, meaning their levies could exceed $3 million on journeys bringing $10–$15 million in revenue.
“The proposed fees are huge, and they will get rolled into what shippers have to pay, and hence consumers,” according to Willy Shih, an international trade expert at Harvard Business School.
The potential impact of these fees could be substantial. Last year, U.S. ports along the country’s coasts received over 57,000 visits from cargo ships of various types, according to the Cato Institute. If 30% of these vessels had Chinese connections and paid an average port fee of $750,000, the total fees would amount to over $11 billion annually, the institute noted.
Shipping industry analysts see obstacles
Beyond the immediate financial burden, industry analysts point to fundamental practical obstacles in implementing the proposal’s requirements to use American ships for a certain percentage of shipping in the country. U.S. shipyards currently produce only about three large commercial vessels annually and are already struggling with existing orders.
The Philly Shipyard faces lawsuits over delays in constructing a rock installation vessel, while the Seatrium AmFELS shipyard has yet to deliver ships originally scheduled for completion in 2023, according to Maritime Executive.
Building specialized vessels presents even greater challenges. A 2015 government report found that constructing a liquefied natural gas tanker in a U.S. shipyard—something not done since 1980—would take four to five years, raising questions about how such vessels could be ready within the proposal’s three-year timeframe.
The domestic shipping industry also faces an “acute” shortage of qualified personnel, according to a U.S. shipping executive’s 2023 assessment, calling into question where crews for an expanded U.S.-flagged fleet would come from, the Cato Institute said.
Cost disparities present another significant hurdle. U.S.-flagged ships cost approximately 4.4 times more to operate than their international counterparts ($11.1 million versus $2.6 million annually), while American-built cargo ships typically cost four to five times more to construct than those built overseas, the institute said.
Tariffs impose another barrier to trade
The USTR’s proposed actions against Chinese ships come along with a series of tariffs being imposed by the Trump administration. Tariffs of 25% on imports from Mexico and Canada began March 4, though there was already a reprieve for carmakers on March 5.
New tariffs on China, comprising an increase from 10% to 20%, also went into effect March 4. China and Canada plan to respond with reciprocal tariffs, and reciprocation from Mexico was considered likely.
The tariffs, and proposed fees on Chinese vessels, are part of broader set of trade policy changes by the Trump administration designed to protect U.S. industry.
U.S. Commerce Secretary Howard Lutnick expressed support for the administration’s approach, saying computer chipmaker TSMC had expanded its U.S. investment because of the possibility of separate 25% tariffs, according to Reuters.
Economic analysts have said the approach will hurt the U.S. economy. “It’s going to have a very disruptive effect on businesses, in terms of their supply chains as well as their ability to conduct their business operations effectively,” said Eswar Prasad, an economist at Cornell University, according to PBS News.
Companies as diverse as Ford and Walmart have expressed concerns about potential impacts on their businesses, while analyses by the Peterson Institute for International Economics and the Yale University Budget Lab suggest that an average family could face price increases of more than $1,000, PBS said.
Uncertain impacts
As the Trump administration’s trade policies take effect, several key developments may follow in the coming months.
Supply chain adjustments are likely as importers respond to the new tariffs. Companies with significant Canadian and Mexican imports will need to evaluate options, which could include finding alternative suppliers or adjusting pricing strategies.
Legal and diplomatic processes may follow. Both Canada and Mexico could challenge these tariffs under the U.S.-Mexico-Canada Agreement. The World Trade Organization could become a venue for international trade discussions, though the Trump administration has historically shown skepticism toward multilateral institutions.
Meanwhile, the shipping industry faces a profound dilemma with the proposed Chinese vessel fees. If fees are implemented after the March 24 hearings, global carriers will need to decide whether to absorb massive new costs, restructure their fleets away from Chinese-built ships (a practical impossibility in the short term), or pass costs directly to American businesses and consumers. The outcome could fundamentally reshape global maritime economics.
