Analyzing the Impact of the New US Port Fee Policy on the Global Shipping Industry

The former Trump administration is preparing to implement a new port fee policy on ships that are owned by or built in China. This policy, expected to take effect in October 2025, is causing a “wave of exodus” as Chinese ships flee routes to the US, leading to major disruptions in the global shipping industry.

This move stems from a phased fee structure announced in April by the US Trade Representative (USTR) targeting ships owned or operated by Chinese companies, as well as China-built ships operated by other carriers.

Starting October 14, Chinese vessels entering US ports will be taxed at $50 per ton of displacement, up to five times per year, increasing to $140 per ton in 2028. According to experts, these costs could amount to several million dollars per ship.

For other carriers that only use China-built ships, the initial fee will be $18 per ton or $120 per container (whichever is higher), with an expected increase to $33 per ton or $250 per container in 2028.

The USTR stated that these fees are intended to create a level playing field, after China gained dominance in the global shipbuilding industry through state support. South Korea and Japan rank second and third, respectively.

Chinese carriers like the government-backed Cosco, which calls the fees “unfair,” may find that direct routes to the US are no longer economically viable.

Industry and Expert Reactions

Experts in the shipping industry have expressed concerns about the policy’s impact.

“Exodus” of Chinese Ships: According to Philip Damas, Director of the London-based maritime consulting firm Drewry, the percentage of China-built container ships calling at US ports could drop from nearly 20% in late May to just 5% by October. Damas predicts that the “exodus of Chinese ships will accelerate as October approaches.” Data from Drewry shows that the total number of Chinese ships on three major US routes decreased by about 8% in just two months, from late May to late July.

Immense Costs and Competitiveness: John McCown, an expert at the Center for Maritime Strategy, said that bearing the new fees is “unfeasible” for carriers. He estimates the costs could reach several million dollars per ship. If Chinese carriers continue to operate and pay the fees, they will have to pass these costs on to customers, which would significantly reduce their competitiveness.

Alliance Solutions and Difficulties: To counter the new policy, shipping alliances like the Ocean Alliance (including Cosco, OOCL, CMA CGM, and Evergreen) are seeking to coordinate to avoid using Chinese ships on US routes. However, according to Damas, swapping vessels is not a perfect solution because using one’s own ships is always cheaper than chartering space on a partner’s vessel. McCown also noted that agreements between alliance members will “become messy.”

Lack of Policy Clarity: Leigh Hansson, a lawyer with the law firm Reed Smith, said that companies are still in the process of understanding the fees and exemption conditions. She emphasized that “people are still confused about what fees will ultimately apply” due to several changes from the initial proposal.

Chinese Government’s Response

The response from the Chinese government and its major carriers has been sharp. Chinese carriers like Cosco, a government-backed enterprise, have called the policy “unfair.”

Beijing has repeatedly spoken out against US trade policies, particularly tariff and non-tariff measures targeting Chinese industries. The Chinese government may view this move as part of a strategy to curb its rise in the global shipbuilding industry.

Assessing the Impact on Vietnam

The new US port fee policy will also have significant effects on Vietnam, both positive and negative.

Negative Impacts:

• Increased Shipping Costs: The “exodus” of Chinese ships from US routes could reduce the number of available vessels, leading to a shortage of shipping capacity and driving up freight rates. As Vietnam is a leading exporter to the US, Vietnamese export businesses will incur additional shipping costs, reducing the competitiveness of their goods.
• Supply Chain Instability: Carriers must adjust their routes and fleets, causing delays and instability in the supply chain. This could affect the schedule for transporting goods from Vietnam to the US, especially in industries that require tight delivery times.

Positive Impacts (Opportunities):

• Opportunities for Non-Chinese Carriers: Vietnamese or other international carriers not affiliated with China can seize this opportunity to increase their operations on US shipping routes. This would help them expand their market share and increase revenue.
• Enhanced Role for Vietnam: As global supply chains are restructured, Vietnam could become a more important logistics and manufacturing hub. International investors and manufacturers may seek alternative partners and routes, helping Vietnam solidify its position in the supply chain.

Forecast and Outlook

This port fee policy is seen as a “lighter” version of a tariff. However, it still has the potential to increase shipping prices and cause major disruptions in the industry. Experts like McCown believe that these port fees could be a key factor in future trade negotiations between the US and China.

With the policy set to take effect in October 2025, carriers and export businesses need to be prepared for the changes. Finding alternative shipping partners, diversifying routes, and proactively negotiating freight rates will be necessary steps to mitigate risks.

Source: Collected from the internet and from Nikkei Asia