The Office of the United States Trade Representative (USTR) proposed a plan on Friday (February 21) to impose new fees on merchant ships manufactured in China and require some American products to be transported by U.S. vessels.
The plan aims to address Beijing’s unfair competition in the shipping, logistics, and shipbuilding industries, as well as challenge the maritime ambitions of the Chinese Communist Party.
This proposal stems from the just-concluded Section 301 trade investigation, which began during the Biden administration and released its report four days before President Trump took office. The USTR’s investigation findings indicate that China has monopolized shipping, logistics, and shipbuilding industries by unfair means, weakening global competitiveness and significantly expanding market share.
In 1999, China held less than 5% of the global shipbuilding market share, which increased to over 50% by 2023. In contrast, the United States, despite implementing protective measures for a long time to encourage the use of U.S.-built and operated vessels, has seen a continuous decline in domestic shipbuilding capacity.
Former U.S. Trade Representative Dai Qi stated in January this year that the U.S. commercial shipbuilding industry ranks 19th globally, constructing fewer than five ships per year, while China builds over 1,700 ships annually.
Increasing the transportation cost of Chinese merchant ships may present opportunities for shipbuilders in South Korea and Japan. Currently, the global merchant shipbuilding industry is dominated by China, South Korea, and Japan, with a combined market share exceeding 90%. The Biden administration believes that China’s shipbuilding industry advantage stems from low-cost strategies, low labor standards, and artificially suppressed labor costs.
The USTR plan proposes levying several service fees on Chinese-built vessels entering U.S. ports, with the highest fee reaching $1 million. Additionally, the plan stipulates that at least 1% of maritime goods exported to the U.S. must be transported by U.S.-flagged vessels operated by American companies initially, gradually increasing to 15% over seven years, eventually incorporating requirements for U.S.-built ships.
Currently, the U.S. Trade Representative nominee appointed by Trump, Jamieson Greer, is awaiting Senate confirmation.
Considering the global shipping industry’s heavy reliance on Chinese vessels, commercial maritime transport is seen as a crucial leverage point that Beijing can control. Any disruption to this system, whether accidental or deliberate, could potentially trigger supply chain disruptions, a risk that the U.S. is seeking to avoid.
The USTR’s proposal has received support from unions, but retailers may hold opposing views, fearing that additional costs will be passed on to consumers. The proposal is now open for public comments and is expected to hold a public hearing in March.