AgTC: Exporters pushing to block proposed China ship penalties

Republicans in the US Senate and House are hearing from agricultural exporters that they should oppose Chinese-built ship penalties, proposed by the Trump administration, warning that farmers will lose export markets if the proposed penalties, assessed on ocean carriers arriving at US ports, are imposed, according to Peter Friedmann, executive director, Agriculture Transportation Coalition (AgTC).

Friedmann hopes that the Trump administration will soon withdraw the proposal.

On April 1^st, Friedmann told the Propeller Club of Northern California: “We can say this, that the farm-state Senators and Congress people are very concerned. They are the red states and there are some, quite a few actual MAGA (Make America Great Again) congressmen from those areas with whom I've been discussing this, who are communicating with the MAGA leadership, the President on why this is not a feasible scheme. We don't want to knock U.S. agriculture completely out of the global market. You cannot increase the transportation costs and keep our … US agriculture goods competitive when they can be sourced from other countries in the world … On April 17th the USTR (US Trade Representative) will have some announcement.”

Friedmann added that he does not oppose supporting U.S. shipbuilding but believes a better means is for the federal government to directly invest in new U.S. shipbuilding rather than penalizing ocean carriers who own Chinese-built ships arriving at US ports. This is part of an unfair trading response proposed by the Biden administration and now the Trump administration’s US Trade Representative. The allegation is that Chinese shipbuilders deploy unfair trade practices that have adversely impacted US shipbuilding: “Depending on whether you're talking bulk or break bulk or container vessels between 50% and 80% of the world's fleet is either built in China or owned by Chinese interests.”

Section 301 of the US Trade Act of 1974 allows the United States to impose trade sanctions on foreign countries that violate U.S. trade agreements or engage in unjustifiable, unreasonable, or discriminatory actions that burden US commerce.

Lars Jensen Reports Ocean Carrier & Trade Challenges in 2025

Friedmann made his observations to the Propeller Club while introducing Lars Jensen, CEO, of Vespucci Maritime based in Copenhagen, Denmark. Jensen provided an extensive review of trade and ocean shipping challenges that will complicate 2025.

For starters, Jensen echoed Friedmann's analysis: “If I look at the US Trade Representative’s Section 301 proposal and I look at the practical ramifications of the proposal … this will cost $24 billion a year (in penalties). And that is basically (what) US importers and exporters are going to pay. On average, that is $1,000 per 40-foot container for every import and export box. In some trades that is a fee that is higher than the freight rate itself these days.”

The result will be fewer port calls at US ports so carriers can minimize the penalty cost on their ships and focus on sailing to larger US ports where they will discharge their cargo.

Jensen said that US importers and exporters also faced additional and unusual challenges in 2025 due to the “tsunami of tariffs” imposed by the Trump administration. This is adding to uncertainties and is likely to raise prices for imports and exports, especially since European and Asian trading partners are retaliating with their own tariffs.

One unintended consequence of the Trump administration’s tariffs is that it is bringing China closer to Japan and South Korea, formerly close allies of the United States: “What we are now seeing (is) this might create unusual bedfellows. Yesterday we saw an announcement from China, Japan, and South Korea. They usually don't act in unison, but not having spoken for five years, they now had an economic summit and agreed to make a joint alliance to retaliate on US tariffs So, this whole tariffs tsunami … that is changing almost by the day, I don't see any kind of stability anytime soon. So, sadly all importers and exporters will have to model their way through a constantly changing landscape.”

Another consequence is delays at US Customs: “Even if there is no DOGE (Department of Governmental Efficiency lay-offs) of US Customs, the tariff tsunami is going to make Customs’ job a lot more complicated, which means more work for US Customs agents. So, there is a significant risk of a scenario where US customs itself becomes a bottleneck in the supply chain in 2025. That is going to impact not only seaports, also airports, land borders.”

Jensen on Red Sea Diversions and More

Red Sea: The threat of attacks on ships accessing the Suez Canal headed to and from the Red Sea will continue to divert ships around the coast of Africa and away from the Suez Canal: “The developments in the last two and a half weeks have brought us back to square one. We are now at a point where there is no ceasefire in effect … in Israel and Gaza and there have been constant U.S. attacks on the Houthis the last two and a half weeks …The gauge is when will we reach a point where major shipping lines will send a ship worth a billion dollars … with cargo through the Red Sea? So, it is not enough that the US is conducting successful military strikes. We need to make sure no ships can get shot at.” Here, U.S. Atlantic ports experience delays, when shipping to and from Asia is diverted away from the Suez Canal. Historically, 33% of containers from Asia transited the Suez Canal heading to the US East Coast.

Blank Sailings: “So, spot rates are weak because we have got too much supply because the carriers have their eyes on transitioning to the new alliances. What that tells us is that this is temporary. This means that as the new alliance networks get firmly into place, carriers will become better and again cancel sailings … But for basically the next four to five weeks on the Atlantic, on the Transpacific on Asia to Europe, we are talking something like 50, 60, 70 blank sailings across all the carriers. So, the carriers are now beginning to ramp up on blank sailings again, matching with their new services … So, the weakness and spot rates, we might expect this to last maybe a few weeks more, but as we get into May, this is going to be reversed.”

2025 Peak Season Demand Looks Good … But: “2025 is also going to be a strong peak season, but not as strong as last year. We have had more vessels delivered since last year. So, there's a little bit more slack in terms of capacity out there. So, the baseline everybody should be planning for is a peak season 2025, especially for the importers that is stronger than usual but not as strong as what we saw last year … I would raise a warning note here. If we get a US market downturn, that would likely be triggered by US consumers pulling back, that would trigger an inventory correction and that could cause transpacific demand volumes to drop very, very rapidly. That is a scenario that should be taken into account …”

Political Factors Will Complicate Trade

Ukraine War: “The Russia, Ukraine war is likely to get an indirect impact. I can easily see a scenario where this leads to a demand boom for container shipping into Europe here in 2025 and in 2026 because the indirect impact of the US change in their position towards Russia means that the EU is now rapidly proceeding down a path of rearmament. That means about 800 billion euros now set aside for military rearmament, that is a lot of money going into manufacturing in Europe. That's going to be materials and components to be imported and the boost to the economy itself is likely going to create a demand boom for container shipping into Europe.

Panama Canal: “The Panama Canal is the one thing from an operational perspective, I would not worry about. Yes, it is a geopolitical hot potato between the US and Panama still, but if Panama has it, they will do whatever they can to operate it.”

Taiwan Strait and South China Sea: “The next potential troublesome spot … will be … Taiwan and the Taiwan Strait, which is likely to be a flashpoint ... Less likely, but still should be on everybody's radar is the South China Sea, where, of course, for the better part of a couple of decades, China is insisting it is their ocean. They are doing what they can to, at times, harass … commercial shipping going through.”

Decarbonization of Ships: “Here in April, there is a meeting coming up of the IMO (United Nations’ International Maritime Organization) …The intention for that meeting is for the IMO countries to agree on binding measures to try to achieve the decarbonization targets for 2030, 2040, and 2050. There are a lot of shipping lines, as well as some of the major container lines, that are lobbying hard for what at best can be described as a global carbon tax on marine fossil fuels. Whether they will be successful remains to be seen. They are at least optimistic that is going to happen. My view on this is if that happens, we are likely going to see a partial fragmentation. I cannot see a scenario wherein, for example, the US under the Trump administration would ratify that. I cannot see a Trump administration agreeing to a global carbon tax on shipping with money going into a UN body … That's just not going to happen.”