Trump's sweeping tariffs and penalties on China-built ships have turned global shipping into the front line of economic war, observes Shyam G Menon.
For Donald Trump it was 'Liberation Day', one of a series of tumultuous milestones marking the early phase of his second tenure as president of the United States.
For global shipping, April 2, 2025 -- the day the US government announced tariffs on imports from several countries, combined with penalties proposed on China-built ships calling at US ports and levies on shipping lines with orders placed at ship building yards, was being described as a day of potentially serious consequences.
The concerns may be quickly understood. According to the 2021 Review of Maritime Transport brought out by UN Trade & Development (UNCTAD), more than 80 per cent of goods worldwide are transported by sea.
As per the Office of the United States Trade Representative (USTR), the US was the world's second biggest trading nation (behind China) in 2022 and the world's biggest importer of goods with the import value that year touching 3.2 trillion dollars.
Sparks will fly and international business will become nervous when the world's biggest manufacturer-exporter and the world's biggest market decide to joust.
What makes the contest of 2025 particularly interesting are the multiple trade barriers suddenly erected and the cumulative impact it holds for both earlier reached equilibriums on the quantum of goods moving and how said goods move.
A recent report in Lloydslistintelligence.com on the Capital Link International Shipping Forum held early April in New York (against the backdrop of Trump's measures) summed up the reading in the industry as potentially positive for short term spot freight rates (that is, from the perspective of those earning from freight rates), positive for long term fundamentals courtesy fewer Chinese newbuild orders and at the same time negative due to 'demand destruction'.
The list of countries hit by tariffs is long. No further tariffs were announced for Canada and Mexico, both immediate neighbours of the US.
China, already hit by the US with a 20 per cent tariff was gifted an additional 34 per cent, taking its total to 54 per cent.
India has been awarded 26 per cent tariffs. On April 4, Reuters reported that China had hit back with an additional 34 per cent tariff on US goods.
The report said that with the latest moves, investment banker J P Morgan 'now saw a 60 per cent chance of the global economy entering recession by the year end, up from 40 per cent previously.'
The impact of Trump's actions on global shipping hasn't been sudden.
It was building up, through the likelihood of tariff wars with the trading partners of the US to political rhetoric rocking a huge ports-deal and on to the potential for further unsteady waters caused by proposed penalties on China-built ships and those patronising Chinese shipbuilders.
A billionaire caught in the middle
Storm clouds continue to haunt one of the biggest deals in the business of sea ports and container terminals, announced early March 2025.
'CK Hutchison Holdings' sale of its sprawling overseas port business could trigger a wave of competition reviews in the more than 20 countries where the docks are located should their governments deem them necessary,' the South China Morning Post reported on March 29.
A day earlier, on March 28, the newspaper had informed that CK Hutchison Holdings may not go ahead with the sale of its two strategic terminals on the Panama Canal as previously agreed to.
It later said that while April 2 was set as the date for signing a definitive agreement regarding the two terminals, it was understood 'not to be a firm deadline'.
The latest volley of uncertainty is subsequent to China's State Administration for Market Regulation deciding to probe the deal.
It was on March 4, 2025 that news appeared of an in-principle-agreement reached to sell 90 per cent of the interests held by CK Hutchison Holdings Limited in two Panama Canal terminals and 80 per cent of its ports division -- Hutchison Port Holdings (HPH) -- to BlackRock and Terminal Investment Limited (TiL) for 22.8 billion dollars.
TiL is a subsidiary of the world's biggest container shipping line, Mediterranean Shipping Company (MSC).
The transaction covers 43 container ports in 23 countries and involves 199 berths.
CK Hutchison's press release on the subject (available on its website), added that the sale does not include stake held in HPH Trust, which operates ports in Hong Kong, Shenzhen and South China or any other ports in China.
In early March itself, observers of the shipping business had cautioned that the sheer scale of the proposed transaction and what it potentially meant as market share in the ports business at various locations worldwide, would invite the gaze of regulators.
In retrospect, that may appear the logical market side of things. What rendered a political spin to how the deal got perceived, was its Panama Canal-related component.
The canal is crucial for the movement of ships from the US west coast to the east and vice versa.
Clamping down on alleged Chinese control of ports on the canal had been part of president Donald Trump's rhetoric against the growing influence of China in global commerce and trade.
Trump wasted no time in highlighting the role of BlackRock, an American company and the world's largest asset manager, in securing control of the Panama Canal terminals.
It was sought to be positioned in public imagination as an American victory. Chinese reaction was bound to happen because just as the US felt insecure given Chinese presence on the Panama Canal, the Chinese, now among the biggest players in international trade and commerce, would feel concerned if the equation reversed.
Especially in a Trump season of trade war with China.
On March 14, splash247.com, reported that Beijing's public criticism of CK Hutchison's sale of most of its ports division to MSC and BlackRock had 'brought into question whether the transaction, the largest ports deal in history, will be completed'.
It cited a commentary published in a pro-Beijing publication and later shared in full by Beijing's Hong Kong and Macau office on its website.
The report mentioned the commentary saying that CK Hutchison should think twice, which side it wants to stand with.
The commentary is also said to have called the deal, 'a betrayal of all Chinese people'.
CK Hutchison Holdings belongs to the stable of businesses promoted by Hong Kong-based billionaire Li Ka-shing.
Twenty-three days after the giant ports deal was disclosed to the public, on March 27, Bloomberg reported: 'China has told State-owned firms to hold off on any new collaboration with businesses linked to Li Ka-shing and his family, according to people familiar with the matter, after the Hong Kong billionaire irked Beijing with his plan to sell two Panama ports to a global consortium.
'The directive was issued to State-owned enterprises last week at the behest of senior officials, the people said, asking not to be identified discussing private matters. Existing tie-ups are not affected, they added. Under the directive, state enterprises wouldn't immediately get approval for business activities linked to the tycoon.
'The regulators are also reviewing what investments the family has in China and abroad in a bid to better understand the breadth of their business dealings, the people said.
'The order to pause new dealings doesn't necessarily mean Beijing will bar State firms from working with businesses linked to Li. But it does ratchet up pressure on the 96-year-old billionaire after CK Hutchison's deal with a BlackRock Inc.-led consortium to sell ports in Panama and elsewhere put his conglomerate's flagship entity in the crosshairs of US-China tensions.'
A plan to build ships by penalising ships built in China
Manoeuvres around the Panama Canal terminals pale in comparison to what may happen should another proposed regulation born from US-China tensions become formal law.
The Trump administration is expected to take a call on imposing stiff penalties on ships built in China, calling at American ports.
The US proposal is inspired by allegations ranging from suppressed labour costs to forced technology transfers and intellectual property theft, within the Chinese ecosystem of maritime, logistics and shipbuilding sectors, cited in a report by the office of the United States Trade Representative (USTR).
The problem is -- China accounts for a major share of the world's ship building capacity and if penalties are imposed simply because a ship happens to be built there, then there would be plenty of ships ineligible to call at US ports or capable of doing so only at added cost to shippers.
On February 28, 2025, Reuters quoted Ramon Fernandez, the Chief Financial Officer of CMA CGM (among the world's top three container lines) saying, 'China builds more than half of all container ships in the world, so this would have a significant effect on all shipping firms.'
The USTR investigation and report, followed five national labour unions filing a petition requesting an investigation into the acts, policies, and practices of China targeting the maritime, logistics, and shipbuilding sectors for dominance.
The petition was filed in March 2024. Trade journals reporting on the subsequent USTR recommendation of steep fees imposed on Chinese built ships, have pointed out that China's share in shipbuilding moved up from less than five per cent in 1999 to over 50 per cent in 2023.
The US has a corresponding market share of just one per cent. The US has been talking to Korean and Japanese shipbuilding yards to augment its capacity.
USTR's report on its investigation (available on the agency's website) also said that China's ownership of the world's commercial shipping fleet had risen to over 19 per cent as of January 2024.
China controlled production of 95 per cent of shipping containers and 86 per cent of the global supply of intermodal chassis.
A USTR press release of January 20, 2025, quoted Ambassador Katherine Tai (former USTR) saying, 'Today the US ranks 19th in the world in commercial shipbuilding, and we build less than 5 ships each year, while the PRC is building more than 1,700 ships.
'In 1975, the United States ranked number one, and we were building more than 70 ships a year.
'As per published reports, the USTR has recommended fees of up to a million dollars per port call (in the US) for ships operated by Chinese carriers, up to 1.5 million dollars per port call for operators of Chinese built ships and compulsory US flag requirement.
'There is also provision for tiered fees calculated on the basis of what the percentage of Chinese built ships is, in a given operator's fleet and what its prospective orders at Chinese shipbuilding yards are.'
March 24 was the deadline for receiving public complaints before the president takes a decision.
If imposed, the steep penalties will most likely be passed on to the export-import trade by shipping lines.
Reports say that the worst hit could be container shipping. At least three lines or consortiums from the top ten container lines of the world are currently heavy in Chinese built tonnage.
Additionally, it is quite common for container ships to call at multiple ports in a given country. Select players from the industry, could thus be impacted for both owning/operating Chinese built ships and for having multiple port calls.
The element of unpredictability
The US is a major destination for container ships. But the country has a limited presence in the business of owning and operating container ships.
In the list of the world's top 30 container shipping lines as of March 2025 (reproduced by Wikipedia from Alphaliner), the US had just one entry -- Matson at 28th spot.
Companies from nations friendly to the US will be hit if the proposed regulations take hold.
Many of them have Chinese-built ships, owned or chartered by them besides ships on order at Chinese yards.
Late March, news reports citing analysis by Alphaliner of February 2025 figures, said that 190 of 1,002 port calls in the US, by 488 different container ships, featured China-built vessels.
The majority was built in South Korea. MSC, CMA CGM and Maersk – the world's top three lines had their share of China-built ships plying to the US.
An interesting angle, however, lay in the case of ZIM, hailing from a nation strongly allied with the US.
For this Israeli line, among the world's top ten container shipping companies, a good portion of the ships it had on US routes were China-built.
According to these reports, while the top three big players could move their ships around the various global shipping routes they plied, ZIM had 48 per cent of its fleet capacity deployed on the Asia-North America sector.
Theoretically, this could mean limited room to redeploy. Equally critical would be how new the company's existing charters involving China-built ships are.
As for what makes Chinese shipyards click, voices from the trade have -- among several reasons -- pointed to the strategic importance assigned the industry in China; the ability of Chinese yards to be flexible in addressing clients' needs, availability of skilled manpower and strong support from the country's financial institutions.
On March 24, 2025, Reuters reported: 'President Donald Trump's plan to revitalize the US shipbuilding industry is likely to backfire because it relies on proposed fees on China-linked vessels that will hurt domestic ship operators, seaports, exporters and jobs, industry executives said at US Trade Representative hearings on Monday'.
On March 27, CNBC reporting the views of Andrew Abbott, CEO of Atlantic Container Line, a niche ocean carrier, said that the proposed penalties if implemented could throw the global supply chain out of balance, trigger rise in freight rates and impact most, American exporters and importers.
The World Shipping Council has also warned that the proposed tariffs could aggravate inflation for US consumers as well as businesses, put jobs at risk and disproportionately harm US-based farmers and other exporters.
The Lloydlistintelligence.com report mentioned in the early part of this article, quoted Bill Rooney, vice president at container freight forwarder Kuehne + Nagel as saying: 'The Chinese ship fee system, if implemented as proposed, is going to be thermonuclear for the business.'
The same report had a quote from an industry official, which possibly summed up everyone's thinking -- 'Asked for his tanker rate outlook, Navios Partners vice-chairman Ted Petrone responded: "Can you tell me what President Trump is going to say tomorrow before I answer?"'
A reset button at large
Economists like Paul Krugman have poked holes in Trump's premise of the US tariffs being a retaliation for high walls for US goods put up by other countries.
For instance, on April 3, Krugman wrote that he couldn't understand how Trump calculated that the average tariff imposed by the European Union (EU) on American goods was 39 per cent.
Trends in shipping provide a window to the mood of global trade. Having said that, it must be acknowledged that there were distinct peculiarities to the paradigm of trade existing before 2025.
Rightly or wrongly, the world's dependence on China was very high. It is what fetches Trump support from his constituency – within the US and outside -- for the tariffs and penalties he initiated.
The question is how acceptable correcting economic imbalances through politic compulsions would be and whose fault it is that the US became the world's biggest consumer of goods and services and China a giant in supplying the world what it wants.
That question lay at the heart of China's response; it views US actions ranging from tariffs to restrictions on shipping, as a case of economic injustice.
As indeed do, many countries hit by the US tariffs. Simultaneously, others sense opportunity to step into spaces vacated by China.
Like it or not, Trump has become a reset button at large. If only we knew what lay at the end of the tunnel, for his words don't offer guidance or solace for what lay ahead.
On April 5, in its report on US markets reeling in the aftermath of Trump's announcement of tariffs, the Hindustan Times newspaper noted Trump saying that the market crash was a 'great time to get rich'.
According to the report: In a post on his own social media platform Truth Social, Trump wrote, "To the many investors coming into the United States and investing massive amounts of money, my policies will never change. This is a great time to get rich -- richer than ever before!!!"'
Does that comfort?
I wonder.
Postscript:
On April 8, 2025 cnn.com reported: 'President Donald Trump is set to impose an astounding 104% in levies across all Chinese imports on Wednesday, White House Press Secretary Karoline Leavitt announced on Tuesday. This comes on top of Chinese tariffs that were in place prior to Trump's second term.'
A day earlier on April 7, Fortune reported: 'The US Chamber of Commerce, which represents millions of US businesses big and small but which is heavily funded by industry titans, has been weighing taking the tariff battle to the courts and is being urged to do so by some of its largest members.
'The move would effectively provide cover for companies distressed about the tariff's impact on their businesses but fearful of incurring the President's wrath by openly criticizing his trade policy.'
It added that Chamber of Commerce spokesperson Matt Letourneau declined to comment and the White House did not immediately respond to a request for comment.
Shyam G Menon is a freelance journalist based in Mumbai.
Feature Presentation: Rajesh Alva/Rediff.com
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