YES, tariffing an island inhabited only by penguins and seals is funny, but this is serious business for shipping. The future course of global trade is at stake. US importers and exporters are simultaneously under siege, courtesy of the trade policies of their own president.

Donald Trump promised fair tariffs that match other countries’ tariffs and non-tariff barriers. Instead, his team used a calculation based on goods trade deficits, with a minimum set at 10%.

Then the administration appeared to apply tariffs to a list of country codes used for internet domains and levied 10% duties on islands used for website registrations, including the uninhabited Heard and McDonald Islands (internet domain code .hm), home of the aforementioned penguins.

The use of the trade deficit formula and the country codes has led to widespread speculation the Trump team generated the Liberation Day reciprocal tariffs — one of the most consequential trade policy decisions of the modern era — using an AI tool such as ChatGPT.

The net result: penguin tariff memes galore and global business consequences that are no laughing matter.

“We worry this risks lowering the policy credibility of the administration,” warned Deutsche Bank analyst George Saravelos, referring to Trump’s tariff formula. “The market may question the extent to which a sufficiently structured planning process for major economic decisions is taking place. After all, this is the biggest trade policy shift for the US in a century.”

The use of goods trade deficits as a proxy for trade barriers — a methodology mocked by economists — will have catastrophic consequences for US importers who’ve been caught completely off guard by astronomical tax bills.

Vietnam, which tariffs US imports at a rate of 15% or less, was hit with a reciprocal tariff of 46% as a result of the Trump team’s formula. American importers who switched sourcing from China to Vietnam after Trump 1.0 will suffer (unless Trump removes the tariff on Vietnam soon, which is certainly possible).

US allies Taiwan, Japan and Europe (at 32%, 24% and 20%) will pay more than foe Venezuela (15%). French territorial islands Saint Pierre and Miquelon (internet domain code .pm) got hit the hardest, at 50%.

Imports from China now face a staggeringly high average tariff rate of 64%. That could go higher still in response to Friday’s retaliation from China (34% on all US imports) and secondary US tariffs on buyers of Venezuelan crude.

To put the severity of this in perspective: cargoes from China accounted for 39% of total US containerised imports last year, measured in teu.

A central problem with Trump’s Liberation Day tariffs is that they have two conflicting goals. They are a negotiating tool — which implies current levels are a ceiling and will come down — and simultaneously an artificial barrier to force manufacturing back to the US, which would require tariffs to remain very high.

Conflicting goals also beset the US Trade Representative plan to levy massive port fees for calls by operators of Chinese-built ships.

If the goal of the USTR plan is to punish Chinese shipbuilding, fees should only be levied on port calls by operators of newbuildings ordered at Chinese yards after a cut-off date.

But there’s a second goal, as well: to generate revenue for the revival of US shipbuilding. For this one to work, the net needs to be cast as widely as possible, ensnaring innocent ship operators who made business commitments for Chinese tonnage long before they knew they’d be penalised.

The USTR hearings on the port fees were held on March 24 and 26. They were followed by a seven-day rebuttal period, which ended on Wednesday.

Trump could soon sign an executive order on US shipbuilding that will require the USTR to move forward with the port fees despite vehement industry objections.

Those fees would create a whole new layer of costs for US importers on top of the already debilitating Liberation Day tariffs. The combined expense would be so high that smaller US businesses may not even have a chance to pass along costs to consumers — they may just have to close their doors.

The port fees would have an even more severe impact on US exporters, many of which would get priced out of global markets.

In an interview with Lloyd’s List on Thursday, freight economist Jason Miller, a professor at Michigan State University, said the USTR port fee plan “is the one that’s cataclysmic, because it will crush US agricultural exports”.

“If you are a foreign country, you don’t even need to retaliate against US exports due to the new tariffs,” said Miller. “You can just let the USTR do it for you.”