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For years, US-China trade tensions have been centred around technology. From chip export bans to investment restrictions, Washington’s most aggressive moves have primarily targeted the rise in China’s advanced industries. However, the sector where trade spats can have the most immediate and widespread global impact is not technology, but shipping.
The Donald Trump administration proposed to charge a fee on commercial vessels built in China into US ports, with additional fees for operators ordering at Chinese shipyards. The idea is to counter the country’s maritime rule. But rather than simply adjusting trade policies, this plan can redefine the balance of power in global commerce.
China’s grip on global shipbuilding is unparalleled. It accounts for almost three-quarters of the world’s shipbuilding orders, in contrast to the US, which has less than 1% of the market. Even the next big markets, Korea and Japan, remain behind the scale of China. China’s transport and shipbuilding stocks have been investors’ favourites for years as they were seen as being staked by Chinese maritime tensions.
In the short term, global shipping companies operating ships built in China face higher costs. Companies selling electronics, automobiles and clothing – sectors relying on low-cost transport – and energy companies relying on Chinese-made tankers for crude oil and LNG shipping face additional margin pressure .
Ship buyers could lean towards South Korea and Japan’s rivals. However, changing the procurement of the fleet is not an easy task. Large commercial vessels take years to build, and existing supply chains are deeply entrenched in China. Shipbuilders outside of China may benefit in the long term, but there is a lot of short-term disruption.
Shares in Cosco Shipping Holdings, China’s largest shipping company, fell 4% in Hong Kong, while Yangzijiang Shipyard fell 6%. Cosco is slightly below its advance revenue, which is just a small portion of South Korean rivals such as Samsung Heavy Industries.
Meanwhile, an immediate response to Beijing’s move, denounced Washington’s actions as an attempt to “politicize and weaponize” suggests possible retaliation.
If Trump’s efforts to succeed in maritime trade are successful, it means structural change and redirecting business from Chinese shipyards. But if they fail, it means that the costs of already tense businesses, consumers and the global trading system are high.
Limiting access to Chinese artificial intelligence chips could slow innovation in one country, but it has little impact on US companies. Meanwhile, transportation disruptions collide with global supply chains such as consumer products, energy and more. It is clear that Trump’s vast overhaul of global trade will not stop at the product itself.
june.yoon@ft.com
