Unlock the White House Watch newsletter for free
Your guide to what the 2024 US election means for Washington and the world
For years, US-China trade tensions have centred around technology. Washington’s most aggressive moves, from chip export bans to investment restrictions, have largely targeted China’s rise in advanced industries. Yet, the sector in which trade spats could have the most immediate and far-reaching global impact is not tech — it is shipping.
Donald Trump’s administration has proposed imposing a fee on any Chinese-built commercial ship that enters a US port, with additional fees for operators that have orders with Chinese shipyards. The idea is to counter the country’s maritime dominance. But rather than just adjusting trade policy, the plan could redefine the balance of power in global commerce.
China’s grip on global shipbuilding is unmatched. It accounts for almost three-quarters of the world’s shipbuilding orders, in contrast to the US which has less than 1 per cent of the market. Even South Korea and Japan, the next largest markets, remain behind China’s scale. China’s shipping and shipbuilding stocks have been investor favourites for years as they were seen as a bet on Chinese oceanic ascendance.
In the short term, global shipping companies operating Chinese-built ships will face higher costs. Companies selling electronics, cars and clothing — sectors dependent on low-cost transport — and energy companies that rely on Chinese-built tankers for crude oil and LNG shipments face added margin pressure.
Buyers of ships are indeed likely to tilt towards rivals in South Korea and Japan. But shifting fleet procurement is not an easy task. Large commercial ships take years to build and existing supply chains are deeply entrenched in China. While shipbuilders outside China may stand to benefit in the long run, there will be plenty of near-term disruption.
Shares of China’s largest shipping company, Cosco Shipping Holdings, fell 4 per cent in Hong Kong while Yangzijiang Shipbuilding fell 6 per cent. Cosco trades at just below 6 times forward earnings, a small fraction of South Korean rivals such as Samsung Heavy Industries, which trades at more than 20 times, reflecting concerns over escalating tensions.
Meanwhile, Beijing’s immediate reaction to the move, which condemned Washington’s actions as an attempt to “politicise and weaponise” trade, suggests the potential for retaliation.
If Trump’s efforts to reshape maritime trade succeed, it could mean a structural shift, redirecting business away from China’s shipyards. But if they fail, it will only mean higher costs for companies, consumers and a global trade system already under strain.
Limiting China’s access to artificial intelligence chips may slow innovation in one country, but has had little impact on US companies. Disruptions in shipping, on the other hand, hit global supply chains for consumer products, energy and more. It is now clear that Trump’s expansive overhaul of global trade does not stop at the goods themselves.
june.yoon@ft.com
