US Port Fee Proposal Intensifies US-China Trade Fears

President Donald Trump’s plans to impose tariffs on China as well as countries with significant trade deficits with the US, plus his proposal to levy large fees on Chinese vessels docking at US ports threaten upheaval for major business sectors in America, as well as trading partners around the globe.

Trump has said his administration will unveil reciprocal tariffs on April 2, especially nations hailed by Treasury Secretary Scott Bessent as the “dirty nine,” which includes long-term allies such as South Korea. This proposal has led to intense debate on tariffs and trade restrictions in multiple countries across the Asia Pacific.

But additional proposals, such as large fees for Chinese vessels that dock at US ports, have spurred an angry backlash in the US and claims that the idea will hammer US exports. Trump said the White House is also pondering levies on sectors such as autos, although there was relief on Monday when his officials said those fees have been deferred.

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The docking fee proposal – part of a plan to help fund a revival of US shipbuilding – has been attacked by critics, who say it could decimate trans-Pacific trade and hit smaller ports in the US if Chinese vessels have to pay up to $1.5 million every time they dock.

That fee would involved an executive order (with retrospective capacity) for the levy to be imposed on ships made in China and vessels from fleets that include ships made in China, according to a proposal by the US Trade Representative’s office.

But a wave of US export and farming bodies say it is unworkable in its present form, as there simply aren’t enough vessels available in the US or other trading partners.

‘Threat to $130bn of US coal exports’

The plan is causing US coal inventories to swell and stoking uncertainty in the agriculture market, as exporters struggle to find ships to send goods abroad, according to Reuters.

Those potential port fees have already limited the availability of ships needed to move agriculture, energy, mining, construction and manufactured goods to international buyers, according to major US exporters and transportation providers who spoke with Reuters, and letters to US officials, and comments ahead of USTR hearings this week.

Vessel owners have refused to provide offers for future US coal shipments due to the proposed USTR fees, Xcoal Energy & Resources CEO Ernie Thrasher said in a letter to US Department of Commerce Secretary Howard Lutnick dated March 12, it said.

Enacting and implementing those fees could cease exports of US coal within 60 days, putting $130 billion worth of shipments at risk, Thrasher said. He said the fee structure could add up to 35% to the delivered cost of US coal, making it uncompetitive on the global market.

“The loss of direct and indirect jobs would be catastrophic,” said Thrasher, who confirmed sending the letter and said he has not received a response.

The letter from Pennsylvania-based coal marketer Xcoal and comments from agriculture representatives showing tangible impacts from the proposed fees have not previously been reported.

Coal mines in West Virginia are also preparing to lay off miners as unsold coal inventories pile up, Chris Hamilton, CEO of the West Virginia Coal Association, told Reuters.

Oil, LNG and fuel exports also at risk

The proposed fees could also make it harder for the US to export other energy products like oil, liquefied natural gas and refined fuels, the American Petroleum Institute, the powerful oil industry lobbying group, said in comments submitted to the USTR dated March 10, Reuters said.

The USTR proposal also seeks to shift domestic exports to ships that are both flagged and built in the United States. The current fleet of US-flagged cargo vessels numbers less than 200, and not all are built in the US.

Very few maritime operators will be able to document that their annual share of US exports meets the required 20% carried on US-built, US-flagged vessels, shipping association BIMCO said in USTR comments dated March 17.

That could meaningfully curtail US energy exports – “specifically liquid natural gas (LNG) as no US-built, US-flagged LNG carriers are in operation nor on order,” said BIMCO, which added that chemical exports could be severely affected as well.

US farmers, who are already getting pummelled by retaliatory tariffs from China, Mexico and Canada, also are caught in the crossfire of the Chinese ship fee fight, the American Farm Bureau Federation said.

The inability to secure ocean freight transportation from May and beyond has restricted their ability to sell bulk US agricultural products like corn, soybeans and wheat because exporters are unsure what the final cost would be, three US grain export traders told Reuters.

The United States exported more than $64 billion in bulk crops, bulk animal feed and vegetable oils in 2024, according to US Census Bureau Trade data. The North American Export Grain Association, which represents crop commodities exporters, will participate in next week’s hearing.

Bulk agricultural exporters could face an additional $372 million to $930 million in annual transportation costs from the fees, the Farm Bureau said. That would represent a substantial margin loss in global markets where competitiveness is often determined by mere pennies per bushel.

US agricultural exporters get an edge over global rivals by leveraging a cost-effective and efficient domestic transportation system for moving products to market, said Alexa Combelic, the American Soybean Association’s executive director of government affairs.

“When you add costs to that efficient system, it’s no longer efficient. We no longer have the competitive edge,” Combelic said.

CK Hutchison ports deal may be cut in half

Analysts have already speculated that Xi and Trump will likely decide the outcome of BlackRock’s $23-billion takeover of 80% of CK Hutchison’s ports.

Many believe he will gain the two ports near the Panama Canal because Washington won’t accept any other outcome. It has a powerful argument, because it built the canal, and a strong US naval presence in the region.

Victor Li, the son of Hutchison owner Li Ka-shing, has reportedly given clues to how the deal could be downsized when announcing the company’s 2024 results, according to a report by Asia Sentinel, which said they expect moderate growth from their nine ports mainly in greater Asia (excluding China) and the 12 they have in the Middle East, plus others in Hong Kong and mainland China.

No mention was made of the company’s ports in Panama “and other parts of the Americas, Europe and Australia,” it said, adding that it has two ports in Australia and 13 in Europe. So, BlackRock may just end up with less than half of the original agreement, if Trump and Xi agree to that.

“CK Hutchison’s Middle East ports, including the Suez Canal, are highly strategic to China,” it said. “It is inconceivable that Beijing would allow the US to control this strategic waterway which enables convenient shipping from Europe to Asia. Moreover, Beijing is unlikely to cede control of more ports in Asia to the US, since Asia is China’s backyard.”

Storms linger over Cosco

Another casualty of the port fee is Cosco Shipping, China’s state-owned entity which is the world’s largest shipping group.

Demand for the $30 billion conglomerate’s vessels will be hit hard if the docking fees are imposed. Last year the firm reported best-ever earnings of $6.9 billion, allegedly bolstered by the Suez Canal crisis and a mass of exports carrying products ordered via Shein and Temu e-commerce apps.

Cosco’s parent company owns the world’s largest fleet by tonnage and its 15% share of the trans-Pacific route.

Chinese President Xi Jinping and his top officials have been working on a reinvigorated trade deal, which could include a green light for the sale of TikTok’s US unit, to try to minimize these repercussions.

Much will hinge on that deal to avoid an all-out trade war and the inflationary impacts that could bring.