On March 24, 2025, the Office of the United States Trade Representative (USTR) held a public hearing regarding proposed actions in the Section 301 investigation on China's maritime, logistics, and shipbuilding sectors. The discussion focused on restrictive measures, particularly imposing a port call fee ranging from $500,000 to $1.5 million per entrance on Chinese-built or operated vessels.
U.S. Enterprises Backlash Over Rising Costs
- Shipping Rates to Soar: Atlantic Container Line noted that if the port fees are implemented, the cost of shipping a 40-foot container from North America to Northern Europe would soar from $500 to $2,500.
- Higher Costs for Shipping Operators: All 14 major maritime transport operators serving U.S. routes have Chinese-built vessels or orders with Chinese shipyards. The proposed fees could add $500,000 to $1.5 million per port call for each vessel, creating significant financial strain for these operators.
- Limited Short-Term Alternatives: China accounts for 29% of the world fleet and holds 61% of global shipbuilding orders. While Section 301 investigation claimed to revive the U.S. shipbuilding, American shipyards hold just 0.1% of global orders, with shipbuilding costs two to three times of China's. South Korean and Japanese shipbuilders could absorb some demand, but capacity and technical constraints limit a rapid shift away from Chinese vessels.
Mounting Pressure on Chinese Exports
Chinese manufacturers operate on slim gross profit margins of 15–20%, with even lower margins for low value-added commodity exports such as textiles and furniture. The 20% additional tariff imposed by the U.S. on Chinese goods since March 4, 2025, has already eroded profitability, and additional port fees would deepen losses.
For COSCO Shipping, a major Chinese carrier, the added port fees could increase shipping costs on their U.S. East and West Coast routes by 8.3% to 50%. Smaller vessels and more frequent port calls would experience the steepest cost increases. The higher shipping costs could further weigh on China's industrial and transportation demand, which, in turn, would negatively impact its oil consumption.
To offset the rising costs, Chinese exporters rushed shipments ahead of the new tariffs. In January-February 2025, China's total exports rose 2.3% YoY, with U.S.-bound shipments also up by 2.3%.
Higher Costs for Oil & Gas Trade
- No Direct Impact on China's Oil & Gas Exports: China does not export oil or gas to the U.S., but the proposed port fees would increase the cost of U.S. shipments to China. Since February 10, 2025, China has imposed a 10% and 15% additional tariff on U.S. crude and LNG, respectively. If the port fees take effect, China may further shift crude imports to sources in the Middle East and West Africa, while entirely abandoning U.S. LNG imports due to negative profit margins.
- Rising Costs for U.S. Oil & Gas Trade: Based on WTI crude average of $72/bbl in Jan-Mar 2025, the port fees are estimated to raise crude import/export cost by 0.3%-3.8%. Meanwhile, U.S. LNG export costs are expected to increase by 0.7%-2.6%, based on the average European natural gas TTF of $14.7/MMBtu in Q1 2025.
The above content is the major conclusions and highlights extracted from China (Energy Transition) Policy Perspective. To get detailed full text, send an email to glconsulting@mysteel.com.
