With all the media coverage of tariffs on China, the on-again-off-again levies on Canada, Mexico and most recently Europe, there is a much less talked about trade development underway that could have far broader implications.
Earlier this month, the Trump administration announced its intent to charge docking fees at U.S. ports “on any ship that is part of a fleet that includes Chinese-built or Chinese flagged vessels.” For context, the Center for Strategic and International Studies (CSIS) estimates that Chinese shipbuilders account for more than 50% of all merchant vessel cargo capacity manufactured each year. By contrast, the United States represents less than 1%.
In a study titled Ship Wars: Confronting China’s Dual-Use Shipbuilding Empires, CSIS reported that the China State Shipbuilding Corp., the world’s largest shipbuilding group, “built more commercial vessels by tonnage in 2024 than the entire U.S. shipbuilding industry has built since the end of World War II.”
At issue, according to the report, is the intertwined relationship between China’s defense industrial shipbuilding base and its private shipbuilding infrastructure. The report noted, “Given the substantial overlap in material inputs, production techniques, personnel and infrastructure required for both commercial and military shipbuilding, commercial revenues effectively subsidize China’s naval expansion. By offsetting fixed costs, these earnings enable Chinese shipyards to scale military production more efficiently and at lower marginal expense.”
As a result, China’s naval expansion is being fueled by billions of dollars in commercial vessel purchases from countries including Denmark, France, Greece, Japan, South Korea and Taiwan, among others.
Now what you might ask, does this have to do with the furniture business?
The answer is the recently recommended docking fees for Chinese-made vessels at U.S. ports. Of the seven recommendations in the CSIS report, No. 1 on the list was “impose scalable docking fees on global shipping companies operating Chinese-built vessels.”
The draft executive order recommending the imposition of such levies does not put a dollar value on those fees or show how they are calculated, yet. However, a U.S. Trade Representative proposal recommended a levy of $1.5 million on Chinese-built vessels, according to a Reuters news report.
For furniture importers that think they dodged the 2019 tariffs as well as the most recent additions by moving their sourcing to Vietnam, Malaysia, Indonesia or effectively anywhere else in the world not currently subject to tariffs, the imposition of docking fees on Chinese-built vessels adds yet another potential layer of cost to the global sourcing equation, one that appears even more challenging to work around.
Perhaps as importantly, it shines a spotlight on the growing connection between trade policy and the increasing geopolitical competition between the United States and China, a competition that is likely to impact trade issues with increasing frequency in the months and years to come.
Interested parties have until March 24 to submit comments to the USTR.
Stay tuned; there is much more to come.
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