Trump 2.0, China-US relations and shipping’s ‘parallel’ fleets
An aggressive Trump stance on China would further bifurcate markets
A wide array of US proposals target China. Some are from incoming US President Donald Trump, such as tariffs. Other proposals include a port fee on China-built ships, higher tonnage taxes and lighthouse fees for China-linked vessels, and mandated carriage of some Chinese exports on US ships
WESTERN sanctions have already splintered the global shipping fleet. Ocean shipping markets could see a further decoupling in Donald Trump’s second term if he approves measures that target China.
The US Trade Representative’s conclusion on Thursday that China unfairly pursues dominance in shipbuilding — requiring “urgent action” — hands more fodder to Trump and China hawks in US Congress.
America could target Chinese interests in numerous ways. Proposed actions have been piling up prior to Trump’s inauguration on Monday.
The list of possibilities includes steeper tariffs, more sanctions, port fees on Chinese-built ships, additional US special tonnage taxes and lighthouse fees on China-owned, -operated or -flagged ships, and requirements for carriage of some US imports from China on board US-built vessels.
Brokerage SSY’s global head of research, Roar Adland, said in a recent online post that the “decoupling thesis” he has talked about since 2023 is now “closer to reality”.
“A more aggressive US sanctions regime against China’s shipping and shipbuilding industry… would immediately accelerate such a bifurcation of our industry,” he wrote.
“If I am right in this interpretation, the dark fleet is not a temporary phenomenon but merely the start of a massive transfer of ownership and the gradual build-out of an alternate fleet.”
Adland’s comments echo those of Columbia Shipmanagement chief executive Mark O’Neil, who said at a Capital Link conference in October, “Previously, we had various categories: the dark fleet, the grey fleet, the white fleet. Now there seem to be parallel universes.
“We have a complete parallel shipping industry. We’re perhaps as much of a shadow of the dark fleet as its fleet is to ours,” said O’Neil.
With the second Trump term set to begin, here’s an overview of possible US actions and how they could affect shipping and the ongoing bifurcation of the fleet:
Fallout from USTR ruling
The USTR investigation into Chinese shipbuilding was instigated in March 2024 at the request of US unions. Petitioners asked for a port fee to be levied on all China-built ships, one that is higher for younger vessels. They cited a hypothetical example of a port fee of $1m per call.
The USTR’s decision on penalties can be “at the specific direction” of the US president, meaning it will be up to Trump.
What Trump will decide as president is unpredictable. Much of his pre-inauguration talk is viewed as a negotiating tactic. On Friday, Trump said he had a “good” call with China President Xi Jinping, and that he expects the two countries “will solve many problems together, starting immediately”.
A port fee like the one proposed by US unions would compel ship operators to shuffle deployments and move China-built vessels to non-US services, accelerating the bifurcation of the global fleet that began with Western sanctions.
A Lloyd’s List Intelligence review of ship-movements of China-built vessels found that only 9% called in the US in 1Q24. While that number has likely grown and will continue to increase as Chinese yards deliver more newbuilds, the percentage is still manageable enough to allow operators to shuffle deployments.
Joe Kramek, president of the World Shipping Council, said during a hearing on the USTR case in May that most containerships serving the US are not Chinese-built and vessel operators would be able to “avoid the port fee by shifting Chinese-built ships onto the many non-US routes, while using non-China-built ships for US routes”.
He warned that if shipping companies with a large number of China-built vessels ceased serving the US entirely, it would decrease competition, increasing prices for US importers and exporters.
For any China-built containerships that continued to call at US ports and were charged a port fee, the added expense would be passed along to US importers and exporters as a surcharge, said the WSC in its hearing submission.
Tanker and bulker operators, like container lines, could also redeploy China-built ships elsewhere to avoid a US port charge.
However, this would limit options for owners of China-built vessels — particularly those with smaller fleets — given the importance of US crude, refined products, propane, liquified natural gas, grains and coal to Atlantic Basin spot cargo markets.
More tariffs on China
Trump has stated that he will hike tariffs on all imports from China by a further 10% on top of the current average of 10%. This is expected to be only the first step up for new Chinese tariffs.
Tariffs have pushed more Chinese goods exports away from the US since Trump first enacted them in 2019 and president Joe Biden kept them in place. According to Chinese customs data, the US accounted for 19.2% of Chinese goods export value measured in Yuan in 2018 — prior to initial Trump sanctions — but just 12.7% in 2024.
Chinese export volumes that didn’t go to the US were redirected to Southeast Asia and South America. Total Chinese goods exports have grown sharply despite US tariffs, with the Yuan value surging 167% in 2024 versus 2018, a positive for international shipping demand.
The initial effect of the new round of Trump tariffs is expected to be a pull-forward of containerised demand followed by inventory drawdowns, impacting timing of flows but not total volume. Tariffs are paid by US importers, so there is no cost impact for ocean carriers.
Longer term, the concern for shipping is that tariffs will destroy demand via inflation, reducing volumes at sea. The counterargument is that tariffs redirect trade flows, as they have since 2018, preserving shipping demand while altering deployments as globe trade continues to decouple.
More sanctions on oil trades
One of the biggest variables for shipping is how Trump will handle sanctions on Iranian and Russian petroleum exports.
Tougher sanctions on Iran are widely expected, with some speculation that these sanctions might target Chinese ports.
Shipping impacts of US and G7 sanctions have been mixed, depending on the shipping segment. Aframax and suezmax tankers benefited from sweeping shifts in trade patterns caused by Russia sanctions in 2023-2024, whereas very large crude carriers lost business to the dark fleet*. Mainstream VLCCs have also lost business due to Iran’s ability to evade US sanctions.
The barrage of Russia sanctions in the waning days of the Biden administration significantly improved the outlook for VLCCs, given China’s and India’s newfound reluctance to accept dark fleet cargoes.
However, the outcome will depend on how Trump enforces those sanctions, and on the path of US-China relations, and thus, China’s future willingness to buy Russian, Iranian and Venezuelan crude.
Geopolitics will dictate whether the shadow fleet is ultimately wound down, or whether it will live on as a parallel fleet that is perennially refreshed, the scenario cited by Adland.
Special tonnage taxes and lighthouse fees
Another proposal targeting China is embedded in the SHIPS for America Act, a bill introduced in Congress in December that will be reintroduced in the next Congress.
The goal of the bill is to revitalise US shipbuilding — a goal Trump supports.
Peter Hegseth, the nominee for Department of Defense secretary, said during his nomination hearing on January 14, “President Trump has told me that shipbuilding will be one of the absolute top priorities of this administration.”
The SHIPS Act includes language that would increase costs for Chinese ships calling in the US. The language removes presidential authority to suspend special tonnages taxes and light money (lighthouse fees) for vessels that are owned or operated by a “foreign entity of concern”, are registered in such a country, or have been registered there in the past three years.
It defines the foreign countries of concern as China, North Korea, Russia and Iran. “In effect, this will impose a new duty on goods imported on Chinese-owned or Chinese-flagged vessels,” said one of the bill’s sponsors, Arizona senator Mark Kelly.
Under the US Code, special tonnage taxes are $0.50 per net tonne and lighthouse fees are $0.50 per net tonne for non-US ships, with these fees waived for vessels from countries that do not charge “discriminating or countervailing duties”. The change in language in the SHIPS Act implies an additional cost of $1 per net tonne per call for Chinese ships.
For example, the 13,800 teu containership COSCO Shipping Orchid (IMO: 9785770), currently off the US east coast, has net tonnage of 84,940. It calls at three US east coast ports per service loop, equating to a hypothetical incremental cost of around $250,000 per US visit.
Ship operators could reshuffle deployments of Chinese ships to avoid special tonnage taxes and lighthouse fees proposed in the bill. As with the port charge proposed in the USTR case, this would limit spot-cargo options for bulk commodity ship operators.
But the scope of affected ships would be different than in the USTR enforcement case. The proposed port fee suggested by USTR petitioners is only for Chinese-built ships. The SHIPS Act proposal covers ships owned or operated by China, a definition that would presumably include state-controlled Cosco, a company that was recently placed on the DOD watch list.
Cosco is a member of the Ocean Alliance — the world’s largest alliance — along with its subsidiary OOCL, Taiwan’s Evergreen and France’s CMA CGM. In an alliance, each member shares the others’ ships. In addition, other carriers have vessel-sharing agreements with the Ocean Alliance; Ocean Network Express has a VSA with the Ocean Alliance in the Mediterranean-US east coast trade.
Given the scale of the Ocean Alliance in the US container market, it’s hard to see how the proposed added costs could be avoided. If the language is passed into law, additional special tonnage taxes and lighthouse fees would likely be paid by the carrier and passed along to US importers and exporters as surcharges.
Proposal to force some cargoes onto US ships
The SHIPS Act also proposes forcing some US import and export cargoes onto US tonnage, which would further bifurcate shipping and push some vessels to other trades. Requirements to carry cargo on US-built ships would not kick in until after Trump left office.
The bill would require that 10% of cargo imported from China is carried on US-built, US-crewed vessels 14 years after the legislation is passed: 1% in the fifth year and an additional 1% in each year thereafter until year 14.
Assuming US yards can actually build enough containerships to meet the future requirements on schedule, it would decrease market share available to non-US containerships.
It would also increase the costs for importers, as freight rates would have to be higher for transport using US-built ships, because freight income would have to cover these newbuilds’ much higher construction costs, and US importers would be required by law to book some of their cargo on US-built ships.
US importers that do not book the required percentage on US ships would be taxed. They would pay a fine equivalent to the difference between using a non-US ship and using a US ship (language that implicitly confirms higher freight costs for US ships). As with tariffs, the cost liability would fall on the importers and exporters, not ocean carriers.
The bill would also require that a portion of US crude and LNG exports are shipped aboard US-built tankers.
In the first four years after enactment, 3% of US crude exports would have to be shipped on US-flagged, US-crewed (but not US-built) tankers. In the fifth to seventh year, 3% would have to be shipped on US-built tankers, gradually increasing to 10% by year 14.
At least 2% of US LNG exports would have to be shipped on US-flagged, US-crewed tankers through the fifth year after enactment, then 2% on US-built LNG ships in years six and seven, with the percentage gradually increasing to 15% by year 22.
Exceptions would be granted if the new LNG and crude export rules violated requirements of free trade agreements (needless to say, the US and China do not have a free trade agreement).
Crude tankers built in the US are multiple times more expensive than those built in Asia, and a US yard has not built an LNG vessel since the 1970s.
As with the proposed container shipping requirement, freight rates for transport on US crude and LNG newbuilds would be higher than on non-US tankers, given much higher construction costs and the legal requirement to use US tonnage.
The abysmal state of US shipbuilding was summed up by US Navy secretary Carlos Del Toro during a congressional committee in May 2024. “We’ve essentially given up on commercial shipbuilding,” he lamented. “China — and thank God our allies in Japan and South Korea — have invested heavily in shipbuilding. But we’ve lost that art here in the United States. We can’t even build our own LNG ships here in the United States, when we should be building them.”
* Lloyd’s List defines a tanker as part of the dark fleet if it is aged 15 years or over, anonymously owned and/or has a corporate structure designed to obfuscate beneficial ownership discovery, solely deployed in sanctioned oil trades, and engaged in one or more of the deceptive shipping practices outlined in US State Department guidance issued in May 2020. The figures exclude tankers tracked to government-controlled shipping entities such as Russia’s Sovcomflot, or Iran’s National Iranian Tanker Co, and those already sanctioned.