- Proposed U.S. tariffs on Chinese-built and operated vessels could have significant global shipping repercussions.
- China accounts for 41.5% of the world’s in-service fleet and a major share of the global orderbook.
- Over 36,500 U.S. port calls in 2024 could be impacted, with container ships facing the largest cost burden.
- The energy sector is particularly vulnerable, with potential disruptions to LNG, crude oil, and LPG shipments.
The recently proposed tariffs on Chinese-built and operated vessels have yet to take effect, as discussions are still ongoing. However, if implemented, they could cause widespread disruption to global shipping, significantly increase costs, and force major changes in trade routes. China plays a dominant role in shipbuilding, with its shipyards responsible for 41.5% of the global in-service fleet. This includes 22.2% of tankers, 32.2% of container ships, and 11.6% of gas carriers. Additionally, the Chinese shipyard orderbook contains 3,759 vessels, comprising 913 bulkers (6.5% of the global fleet), 776 tankers (9.3%), 591 container ships (8%), and 222 gas carriers (8.3%).
U.S. Trade and Port Calls at Risk
Should these tariffs be enforced, an estimated 36,500 U.S. port calls in 2024 could be impacted. Container ships would bear the highest cost, accounting for nearly 82% of the affected port calls. Given the U.S.’s deep integration into global shipping, these added costs would likely be passed on to consumers, exacerbating inflation and influencing both imports and exports. The energy sector is particularly at risk, with potential disruptions to U.S. LPG, LNG, and crude oil shipments.
Strategic Leverage or Economic Disruption?
The proposed tariffs may serve as a negotiation tool in U.S.-China trade discussions, considering the broad economic impact on U.S. businesses and consumers. However, their practical implementation remains highly uncertain due to the heavy reliance of U.S. trade on Chinese-built vessels. The U.S. has not prioritized oceangoing shipbuilding for global markets, instead focusing on domestic needs. As a result, the U.S.-built fleet is minimal, making it difficult to replace Chinese-built vessels in the near term.
Limited Alternatives and Global Consequences
Finding alternatives to Chinese shipbuilding presents another challenge. Other major shipbuilding nations, such as South Korea and Japan, do not have the capacity to immediately bridge the gap. Additionally, many non-Chinese shipping companies operate Chinese-built vessels, meaning the tariffs could also impact global trade partners beyond China. This could lead to potential diplomatic and economic retaliation. The maritime industry relies on long-term planning and contracts, and sudden tariff implementation could create significant legal and financial uncertainty for shipping companies worldwide.
While these proposed tariffs could provide the U.S. with leverage in trade negotiations, their implementation poses complex challenges. Given the extensive reliance on Chinese-built vessels and the potential ripple effects across the global economy, enforcing such measures would likely disrupt supply chains, increase costs, and strain global logistics. The uncertainty surrounding alternative shipbuilding sources further complicates the feasibility of this policy.
Did you subscribe to our daily Newsletter?
It’s Free Click here to Subscribe!
Source: Breakwave Advisors & Intermodal
