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(Bloomberg) — The Trump administration is proposing fees on the use of China’s commercial ships it says could help counter the country’s maritime dominance. 

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The Office of the US Trade Representative outlined a plan for fees on Chinese-built ships that transport traded goods as well as mandates requiring a portion of US products to be moved on American vessels.

The proposal, announced on Friday, springs from a trade investigation into China’s practices in the maritime, logistics and shipbuilding industries that began under the Biden administration and concluded with a report just four days before President Donald Trump took office. The US inquiry concluded that Beijing was unfairly dominating the sectors and said “urgent action” was needed to address the issue.

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If adopted, however, the proposed fees could translate to additional costs for American consumers, since higher shipping costs could be passed on in the form of higher prices. It’s also not clear that the proposals would be enough to restore American shipbuilding capacity, which has eroded despite century-old protections meant to encourage the use of US-built and -operated vessels.

While the US churns out its own steady supply of warships and Europe leads the world in building cruise ships, global merchant shipbuilding is dominated by three Asian countries: China, South Korea and Japan, which together account for well over 90% of commercial shipbuilding. 

China has targeted the maritime, shipbuilding and logistics sectors for dominance, effectively undercutting competition and winning “market share with dramatic effect,” the Office of the US Trade Representative said in its proposal Friday. 

China’s market share has grown from less than 5% of global tonnage in 1999 to more than 50% in 2023. China owned 19% of the commercial world fleet as of January last year, and it controls production of 95% of shipping containers, the office said. 

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Higher costs for shipping on Chinese vessels could present an opportunity for shipbuilders in South Korea and Japan.

Katherine Tai, who served as Joe Biden’s trade representative, last month said the US ranks 19th in the world in commercial shipbuilding, with a volume of less than five ships being built each year. China, in comparison, builds more than 1,700 per year, she added.

China’s dominance in the industry can be partly traced to low pricing and labor standards as well as artificially low labor costs that undercut competition, the Biden administration said. 

The resulting overreliance on Chinese supplies creates economic security risks tied to potential disruption, the trade office said. 

The remedies proposed Friday, which would be imposed under Section 301 of the 1974 Trade Act, are now subject to public comment and review, including during a public hearing scheduled for next month. 

The US trade representative is proposing several service fees — including a levy of as much as $1 million — to be charged when Chinese-built vessels enter a US port.  

Earlier: US Leans on Shipbuilding Prowess of Allies to Compete With China

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The administration is also proposing steadily escalating restrictions on maritime transport of all US goods. Initially at least 1% of American products exported by maritime vessels would have to be carried on vessels that are both US-flagged and -operated. The requirements would steadily rise, with the threshold climbing to 15% after seven years and eventually encompassing requirements the ships be built in the US too.

The mandate would effectively expand longstanding requirements meant to encourage the construction and use of American ships. Under a federal law known as the Jones Act, US-built, -registered and -crewed ships are required when moving goods between US ports.

The trade office is seeking to meet a statutory deadline to announce remedies in the probe even as Trump’s nominee for USTR, Jamieson Greer, has yet to be confirmed.

Trump started his second term opening new fronts in trade wars, beginning with Canada and Mexico, though ultimately holding off on duties for those North American partners while announcing a 10% tariff on all Chinese goods over Beijing’s failure to stop the fentanyl trade.

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Trump has also threatened tariffs on a range of sectors, including automobiles, semiconductors, pharmaceuticals and lumber by early April.

The commercial shipping sector is viewed as a major leverage point China could exploit given the global trading system’s dependence on its vessels. Any disruptions to that system, accidental or not, could lead to supply chain shocks that the US wants to avert.

The move is supported by unions and has been a focus for lawmakers. National Security Advisor Mike Waltz, then a member of Congress, last year co-sponsored legislation to address China’s advantage.

Retailers are likely to oppose the action, arguing that the added costs would eventually have to be passed on to consumers.

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