Another stagflationary surcharge

Investment Analysis Clubs Macro Economic Trends and Risks
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Every tariff or tax on shipping adds to the costs passed on to consumers. This will increase inflation.

https://www.wsj.com/opinion/donald-trump-shipping-tax-china-jamieson-greer-ustr-ec393447?mod=hp_opin_pos_3#cxrecs_s

Trump’s Shipping Tax Goes Ahead

USTR eases it slightly, but Putin and Qatar will still be pleased.

By The Editorial Board, The Wall Street Journal, April 18, 2025

President Trump whacked Americans with another tax late Thursday as his Administration announced new fees on Chinese ships docking at U.S. ports…

Chinese-owned and -operated ships will be charged $50 a net ton on each trip to the U.S. starting Oct. 14, which will increase to $140 in 2028. Chinese-built ships owned by non-Chinese carriers will be charged a lower fee ($18) that will also climb over time. Because Chinese ships make up a large and growing share of the global fleet, carriers will invariably pass on the costs to customers.

USTR will also require use of U.S.-built vessels to export liquefied natural gas starting in 2028. The lack of U.S.-built LNG carriers will raise costs for American LNG exporters and make them less competitive vis-a-vis Russia and Qatar. …

None of this industrial policy is likely to make American shipbuilding great again. Like the tariffs, they will be a deadweight on the U.S. economy. [end quote]

More stagflationary policy. But wait, there’s more!

https://www.wsj.com/opinion/donald-trump-shipping-tax-jamieson-greer-trade-china-exports-d29c2fd3?mod=wsj_furtherreading_pos_1

Now Trump Wants a Shipping Tax

‘If this happens, we’re out of business,’ says one shipping CEO.

By

The Editorial Board, The Wall Street Journal, April 17, 2025

…
U.S. Trade Representative Jamieson Greer recently proposed to charge fees on Chinese shipping companies and all carriers that use Chinese-built vessels. Fees would range between $500,000 and $1.5 million every time a Chinese-built ship stops at a U.S. port, plus a surcharge for operators with large orders from Chinese shipyards.

Mr. Greer has also proposed export quotas for U.S.-flagged and -built ships that would increase over time. At the start, 1% of U.S. ocean-carried exports would have to be transported on U.S.-flagged vessels of U.S. operators. This would increase to 15% by the seventh year, and 5% of those ships would also have to be built in the U.S…

.S. American-flagged ships cost about 4.4 times more to operate than foreign-flagged vessels. They are also four to five times more expensive to manufacture, which is why even the Netherlands and Finland surpass the U.S. in shipbuilding…No large U.S.-built ship has been sold to an overseas buyer in decades. … [end quote]

The new fees haven’t been imposed yet. They would harm many U.S. exporters.

Wendy

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The few remaining US ship yards have, primarily, been living off the Navy, for decades. Lockheed lives off DoD. And now, Boeing clearly intends to live off DoD as well. Seems commercial buyers don’t tolerate massive cost overruns and delays, but DoD keeps paying and paying.

Steve

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Hopefully that will encourage US ship building in general, an industry we need for the Navy.

Fewer exports would also mean more domestic supply, pushing down the price of nat gas and electricity.

DB2

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It might. But more likely the effects will be more like the Jones Act, which pooches over Hawaii and blocks development of river transport–an area where the US has an enormous geographical advantage over most countries.

More likely it would just mean that producers produce less. Current West Texas Intermediate (WTI) crude oil prices are around $60-65/barrel. That’s right on the borderline of profitability for US producers. If the price goes down much if anything, new wells aren’t profitable.

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Except there is the financial pressure and incentives from the LNG market.

However, we’re discussing natural gas. Just in the last year prices have been as low as $2 (currently $3.24). Low nat gas prices are good for feedstock prices (plastics, pharma, etc.) and electricity prices (nat gas produces the largest share of electricity in the US).

DB2

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Right. But oil and gas prices are coupled, usually oil drives the gas production. Regardless, Google tells me the standalone breakeven price of natural gas is about $3.47.

So again, I’m very skeptical producers will be motivated to increase supply with prices at or below the breakeven point.

https://www.kansascityfed.org/surveys/energy-survey/tenth-district-energy-activity-continued-to-decline/

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Loosely, to be sure. For example, earlier this year the price for NG was as low as $2, about 40% below today’s price. We know that oil didn’t sell at $40 last year. Instead in 2024 it averaged $76, about 20% higher than now.

Having said that, I have no idea what the price of oil or natural gas will be in 2028.

DB2

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US shipyards can barely keep the Navy equipped. Can a US shipyard even build a supertanker? Off the top of my head, Newport News builds the biggest in the country. They have one large construction drydock, which is usually occupied by a carrier for the Navy. There is a yard in Wisconsin that builds Lakers, but the larger Lakers are too big to get through the St Lawrence Seaway, so are stuck in the lakes.

Thinking that the US can build a significant number of large, commercial, ships, in TIG’s lifetime, is probably a pipe dream.

Steve

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“Thinking that the US can build a significant number of large, commercial, ships, in TIG’s lifetime, is probably a pipe dream.”

Ah, but it’s the rhetoric that counts. Just the fact that TIG claims that we can and will do it is enough. Just like he’s promising the folks in WV coal Country that he is bringing back Big, Beautiful Coal. Sure, maybe coal production will increase, but it’ll be automated. And the tariffs TIG is imposing go completely against coal production increasing, as I believe China is the largest customer for that product.

Facts don’t matter when pitchin a story to low info potential voters, but they do matter when as you say, the St Lawrence Seaway isn’t big enough to get those Great Lakes built ships out into the ocean, and the coastal shipbuilding capacity to build them is far short. But it makes perfect sense to burn all of our trade alliances right this second, so we can take a decade or so to ramp up to speed and get the stuff built in house. #sarcasm
This is exactly how TIG has done business all his life, brash, reckless, and arrogant. Let’s see if he can lead the Country to BK, and stiff all creditors, because that is how he operates in real life, not in his mythical rhetoric.

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Don’t forget the Jones Act. It requires shipping between US ports hire American crews and use American flagged ships. Must the ships be made in USA?

Already people gripe about the higher cost–shipping heating oil to New England or anything to Puerto Rico.

It does maintain our merchant marine giving us experienced manpower to expand in the event of an emergency.

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Yes. Some years ago, a company wanted to operate a cruise ship among the Hawaiian Islands. Going from port to port in Hawaii means Jones Act compliance. The ship was indeed built in the US. But then it was towed to Germany for fitting out. How sloppy and slack can US shipyards be that makes it cost effective to tow a ship to Germany for completion?

The ship was built by Ingalls in Pascagoula, Mississippi. Like Newport News, Ingalls leeches off the USN, because DoD tolerates sloth that is unacceptable in the commercial sector.

Steve

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People gripe about the cost of everything, but then they buy the biggest, most garish cars and houses they can possibly make the payments on. People are funny, aren’t they?

Steve

1 Like