As unlikely ally joins tariff war on China cargoes, Trump targets cargo vessels
(Originally published Feb. 27 in “What in the World“) Trump isn’t happy just slapping tariffs on imports made in China. Now he wants to levy any ships carrying imports that were themselves made in China.
He isn’t stopping there, either. U.S. President Donald Trump’s latest trade-war salvo would also impose levies on arriving ships that weren’t made in China if they’re part of a fleet that includes Chinese-made ships. Trump’s proposal: Chinese-made ships pay $1.5 million to dock; other ships in fleets with Chinese ships pay at least $1 million. Each. About 20% of the container ships carrying goods to the U.S. were made in China. Since container ships typically stop at two or three U.S. ports, the levies would likely cost them the equivalent of 20%-45% what they earn on a typical U.S. delivery. And like tariffs on the goods the ships carry, analysts say, these additional costs would likely be passed on to U.S. customers.
Trump’s proposal also seeks to boost the share of U.S.-flagged ships carrying American exports to 15% in seven years, with 5% of all those ships built in the U.S. China now accounts for roughly half of all commercial cargo vessels and analysts say U.S. shipyards don’t have the capacity to achieve Trump’s target to replace it with American tonnage. The levies would, therefore, likely represent a massive opportunity for existing shipyards in Japan and South Korea. In the meantime, importers would likely shift seaborne traffic to ports in Canada and Mexico to avoid the levies, then transport goods from there to the U.S. by truck.
The levies would therefore, represent another transfer of wealth from U.S. consumers to not only the U.S. government collecting them, but a rebate to exporters already facing the threat of lower exports to the U.S. thanks to Trump’s tariffs—Canada, Japan, Mexico, and South Korea.
Trump isn’t just taxing imports from China, though. He’s also further restricting investment from China into the U.S. and its purchase of American technology.
That continues the course maintained under former U.S. President Joe Biden. But Trump and the U.S. Congress aren’t the only ones hitting China for dumping exports on global markets. China’s biggest steel customer is, too.
Vietnam, the biggest importer of Chinese steel, has followed South Korea by imposing temporary, 120-day tariffs of up to 28% on hot-rolled steel imports from China. The move follows a massive surge in Chinese steel exports last year, when the countries mills responded to weak domestic demand and a glut of supply by shipping more steel overseas than they have in nine years.
Exports to Vietnam rose by almost 41%, close to the 42% increase in Chinese steel exports to Saudi Arabia and the 46% rise in shipments to the United Arab Emirates. Neither of those two countries, though, imports nearly as much steel as Vietnam, whose 12.7 million tons in imports last year eclipsed even those by South Korea, with 8.2 million tons.
Exports to countries with big manufacturing bases lends support to complaints by U.S. manufacturers that China’s dumping of exported raw materials is making imports from those nations artificially cheap. But it’s domestic Vietnamese steel mills whose complaints sparked Hanoi’s action. Canada, the European Union, and India are all investigating charges that China is dumping steel into their economies.
The fear is that China is exporting much of that steel to its own manufacturers in China, as they shift production abroad to avoid U.S. tariffs. Chinese investment accounted for 28% of all new projects in Vietnam last year, up from 22% in 2023. That trend has fueled Vietnam’s own trade surplus with the U.S., which climbed last year to $123.5 billion, the third-largest after China and Mexico. Indeed, Hanoi’s tariffs may be intended as a signal to Washington that it isn’t standing idly by as China turns it into a maquiladora, in hopes of avoiding the kind of tariffs Trump has slapped on imports from Canada, China, and Mexico.
Behind this explosion in exported Chinese steel, of course, is China’s slumping property and construction sector. As part of its ongoing policy that “no news is good news,” China’s National Bureau of Statistics in 2023 added land purchases by developers to the list of statistics it would stop reporting. But an analysis by the Financial Times of individual sales data reveals that state-owned developers appear to be stepping in to replace private-sector developers hobbled by the downturn, thereby using public funds to prop up the market.
If it’s true, Beijing is essentially subsidizing its own property market with taxpayer funds in the way it subsidizes production of “strategic industries” such as aluminum, electric vehicles, solar panels, semiconductors, and steel. Given that the property boom has swept up much of China’s financial sector, municipal governments, and public savings, propping it up with taxpayer funds may not be such an unfair transfer of wealth. But it’s far from the kind of painful restructuring economists say China needs to rebalance its economy and pull out of a Japan-style deflationary spiral. On the contrary, propping up land prices would be the kind of tactic that contributes to the “lend-and-extend” mentality that will keep displacing growth with debt repayment indefinitely.
There’s potentially a problem with the FT’s scoop, though: it was only examining data for Beijing, the nation’s capital. Beijing is a big market, but it’s only one market and a very different one than China’s other urban real-estate environments. It is the seat of the nation’s government, for starters. For that reason alone, it could make sense that government demand for land there keeps growing despite falling demand from the private sector. Whatever the reason, there’s no denying that state purchases of land in Beijing grew both in absolute and relative terms over 2020-2023.
The FT has expanded its reporting earlier this week on the holes in China’s social safety net with a report on how high healthcare costs are eating up citizens’ budgets. Seems that Communist China and the democratic United States have more in common than their leaders might like to admit. But there’s no comparison, really. China’s healthcare expenditures in 2023 were just above 7% of China’s GDP; U.S. healthcare spending eats up almost 18% of GDP.