Washington’s tax tsunami hits China’s shipbuilders

Lost in the chaos about the future of Ukraine is US President Donald Trump’s opening salvo challenging “China’s maritime might.”

Earlier this week, policies were rolled out to slap at least a US$1 million tax on Chinese-built and operated cargo ships docking in the United States. 

It came after an investigation by the Office of the US Trade Representative or USTR found that Beijing was heavily-subsidizing shipbuilding in a bid to “dominate” the global market.

“Shipbroker Clarksons reported that 24,800 [Chinese-built] vessels are in operation worldwide – more than any other country,” FreightWaves, a logistics news site, revealed.

Crest of a wave: 

• China accounted for about 5% of the total tonnage of ships built in 1999. 
• By 2023, its share of the market surpassed 50%.

[China] must enhance its capabilities and calmly respond to challenges.

China’s President Xi Jinping

Delve deeper: “[Chinese policy] burdens and restricts US commerce by undercutting business opportunities for and investments in the US shipbuilding sectors,” the USTR stated.

Between the lines: “[This is] restricting competition and choice, [and] creating economic security risks in sectors critical to the functioning of the US economy,” it said.

Rough seas ahead: China’s Foreign Ministry spokesperson Lin Jian blasted Washington, while the country’s shipbuilding association said the USTR investigation was “full of lies.”

Big picture: Trump has already imposed additional 10% tariffs on Chinese goods and an investment ban amid trade tensions. In response, President Xi Jinping has called for “calm.”

What was said: “[China] must enhance its capabilities and calmly respond to challenges,” he told Politburo and State Council officials, Xinhua News Agency reported this week.

China Factor comment: Mired in debt, stagnating wages and rising unemployment, the last thing the world’s second-largest economy needs is to be hit by a full-blown trade tsunami.