15 Apr Proposed US Port Fees On Chinese Vessels To Transform Intermodal Shipping Patterns
A Trump administration port fee proposal designed to boost the U.S. shipbuilding industry could transform international intermodal traffic, shift some container business to ports in Canada and Mexico, and help Canadian National and Canadian Pacific Kansas City railroads in the process.
As mentioned in last month’s newsletter, the US has proposed charging up to US$1.5 million for Chinese-built vessels entering the country’s ports, starting at $500,000 for a vessel operator whose fleet consists of even just one Chinese-built ship, or that has an existing order with a China shipyard. In addition, a charge of $1 million per call would be assessed on vessel operators based in China.
Whilst the objective of these fees is to use them to subsidise the U.S. shipbuilding industry as well as reduce the global dominance of China’s shipyards, speculation is rife that they will negatively impact the US economy by reducing trade and worsening the trade deficit as shipping companies would likely take steps to minimise or avoid the port entry fees. One such solution could be diverting port calls to Canadian and Mexican ports, and then transporting goods by truck or rail from there to U.S. destinations.
This diversion of trade from US ports will have an array of consequences on the USA including the fact that it will add costs for both importers and exporters which will filter through the economy at a wholesale and retail level, resulting in a decline in sales and employment.
In addition, it will create uncertainty around whether shipping companies will curtail their services, omit smaller ports, change their rotations or overwhelm larger ports and potentially cause congestion. All consequences that will inevitably be felt by the end consumer through supply issues and cost increases.
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