THE US Trade Representative’s plan targeting Chinese shipping and shipbuilding is shocking in its scope and severity.

There’s always a great deal of uncertainty about what Donald Trump will actually do, but it’s hard to see how the USTR plan — which will be at Trump’s sole discretion — will not go forward in some form.

Shipping should begin preparing now for exorbitantly high US port charges in the future. The problem is that as of today, the USTR plan is vaguely worded, seems to include various either-or options, and is only a draft.

Whatever the final rule turns out to be, ship operators can pass along extra costs to US importers and exporters, but that would create market distortions. Here are a few hypotheticals:

The Ocean Alliance, because of Cosco’s membership, would face a higher US port fee bill than its competitors. Depending on how you interpret the USTR draft plan, a Cosco ship calling in the US could face a fee of anywhere from $1.5m to $3m for every call. If it’s $3m and a Cosco containership makes three US calls in every service loop ($9m per loop), is it even viable for that vessel to continue US service?

Extremely high port fees could reduce capacity in US trades and increase capacity elsewhere. Redeployment of tonnage could cause supply chain disruptions.

The impact would be particularly negative for low-value, low-margin US containerised exports. Port fees would represent a much higher proportion of their base freight rate than for imports. US containerised export margins would be squeezed.

Much of the US bulk commodity export business hinges on arbitrage and competition with other global sources. Port charges would increase shipper costs for US exports of crude, products, grain, coal, propane and liquefied natural gas. If competing sources offer a better price, it could decrease long-haul tanker and bulker flows, a negative for tonne-miles.

Overall, new US port fees could lead to a lot of reshuffling — not just of deployments but also of operating companies. Fleets might be divvied up into holding companies with Chinese ships and non-Chinese ships, raising the question: who will enforce this rule and will they seek to root out related parties?

S&P markets could also be impacted. If operators unload Chinese ships, secondhand pricing could be at a discount.

Newbuilding markets could be affected too. The whole point of the USTR plan is to punish Chinese yards — and it certainly could. But Japan and South Korea only have so much capacity to fill the gap.

Greg Miller
Senior reporter, Lloyd’s List

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