- The beleaguered coal industry could soon find itself in even more trouble thanks to a proposed levy on Chinese ships.
- The Trump administration has drafted an executive order to levy fines of up to $1.5 million per port call on Chinese-built ships calling at U.S. ports.
- According to the American Petroleum Institute, the proposed fees could also make it harder for the U.S. to export oil, liquefied natural gas, and refined fuels.
Last week, U.S. President Donald Trump imposed a minimum 10% tariff on all imports from 90 countries, roiling financial markets across the globe. U.S. customs agents began collecting the unilateral tariff at customs warehouses, seaports and airports on Saturday, with higher levies on goods from 57 larger trading partners set to start in the current week. As widely expected, China was the hardest hit by the tariffs: China now faces a hefty 64.9% tariff, including an additional 34% duty imposed by former President Trump on top of existing tariffs from previous administrations. Beijing returned fire by announcing a slew of countermeasures, including extra levies of 34% on all U.S. goods as well as export curbs on some rare earth minerals.
And, while some have suggested Trump policies could help revive coal, that’s only a surface argument. The beleaguered coal industry could soon find itself in even more trouble thanks to a proposed levy on Chinese ships.
The Trump administration has drafted an executive order to levy fines of up to $1.5 million per port call on Chinese-built ships calling at U.S. ports. The levy is an attempt to revive the long-declining U.S. shipbuilding industry, with the administration accusing China of “unfair practices”.
Unfortunately, the potential port fees are already having a deleterious effect on multiple sectors of the economy, limiting the availability of ships needed to move energy, mining, agriculture, construction and manufactured goods to international buyers.
Last month, Pennsylvania-based coal marketer Xcoal Energy & Resources CEO Ernie Thrasher told Reuters that vessel owners have already refused to provide offers for future U.S. coal shipments due to the proposed USTR fees. Thrasher estimates that implementing the punitive fees could cease exports of U.S. coal within 60 days, putting $130 billion worth of shipments at risk. Thrasher says the fees could add up to 35% to the cost of U.S. coal, making it uncompetitive on the global market. Chris Hamilton, CEO of the West Virginia Coal Association, told Reuters that unsold coal inventories are rapidly piling up, with coal mines preparing to lay off miners.
“The loss of direct and indirect jobs would be catastrophic,” said Thrasher.
But the coal industry is not the only energy commodity likely to suffer under the ship levies.
According to the American Petroleum Institute, the proposed fees could also make it harder for the U.S. to export oil, liquefied natural gas (LNG), and refined fuels. According to shipping association BIMCO, very few maritime operators are able to meet the requirement by the Trump administration that at least 20% of U.S. exports are carried on U.S. built, U.S flagged vessels, something likely to hit U.S. energy exports “…specifically liquid natural gas (LNG) as no US built, US flagged LNG carriers are in operation nor on order,” said BIMCO.
The levy would undermine the current administration’s energy goals. As one of his first executive orders, Trump expedited the LNG export license process (achieving licensing times one-sixth as long as those seen during the Biden Administration, which revoked these reforms), reduced the permitting time for drilling on federal lands (increasing permit applications by 300%), fixed the New Source Review (which punished companies for repairing and upgrading coal power plants), and opened up millions of acres for domestic energy development. Trump warned Western Europe as early as 2017 to rely on American natural gas rather than Russian energy.
Meanwhile, U.S. farmers are likely to be caught in the crossfire of the Chinese ship fee fight.
Last month, three U.S. grain export traders told Reuters that the inability to secure ocean freight transportation was already restricting their ability to sell bulk U.S. agricultural products like corn, soybeans and wheat. According to the U.S. Census Bureau Trade data, the United States exported more than $64 billion in bulk crops, vegetable oils and bulk animal feeds in 2024. The Farm Bureau estimates that bulk agricultural exporters could see their annual transportation costs increase by $372 million to $930 million due to the proposed fees.
The ambitious USTR proposal seeks to shift domestic exports to U.S.-built ships that are also flagged. However, it’s currently impractical: Reuters estimates that U.S.-flagged cargo vessels currently number less than 200, with even fewer being U.S.-built. China is, by far, the biggest builder of cargo ships, with 81% of the global fleet of container vessels and 75% of bulk carriers built in Chinese shipyards. That’s a massive increase from 25 years ago when China owned a mere 5% slice of the shipbuilding market. In contrast, U.S. shipyards are currently building less than 0.01 per cent of the world’s cargo ships by tonnage, thanks to a strong preference by American shipyards for billion-dollar warships over commercial cargo vessels.
By Alex Kimani for Oilprice.com
Energy News Beat