Who will pay the bill: Tariff boomerang hits US farmers

Editor's note: Séan Doherty is a biz commentator. The article reflects the author's views and not necessarily those of CGTN.

Recent developments in US-China trade relations have introduced significant challenges for international partners. Both nations, instigated by the US, have recently implemented additional port fees on ocean shipping firms, escalating the trade conflict and complicating an already strained global trade environment.

A significant aspect of this dispute is the Trump administration's proposal to impose substantial fees on Chinese-built and operated vessels entering US ports. These proposed fees could reach up to $1 million per transit for Chinese-operated vessels and up to $1.5 million per transit for Chinese-built vessels. While aimed at countering China's leading position in maritime logistics, these fees could disproportionately affect US farmers and ranchers, who rely heavily on affordable shipping options to export their products.

Implications for agriculture

Agricultural exports are particularly vulnerable to these changes. In 2024 alone, US farmers exported over 106 million tonnes of agricultural products. More than 20 percent of US agricultural production destined for foreign markets, according to the American Farm Bureau Association (AFBA). The proposed fees could result in additional transportation costs ranging from $372 million to $930 million annually for bulk agricultural exporters, translating to increased costs per bushel of soybeans and other commodities.

Broader global supply chain disruptions

The escalation of tariffs and port fees has broader implications for global supply chains. Major container lines, including Maersk, Hapag-Lloyd, and CMA CGM, slashed their exposure by switching China-linked ships out of their US shipping lanes, reported Reuters. The situation reflects a growing trend of improvisation among shipping firms as they seek to mitigate the financial impacts of these tariffs.

The proposed fees on Chinese-built vessels represent a significant challenge, as over 21 percent of ships calling at US ports in 2024 were Chinese-built, reported AFBA. This means a substantial share of vessels transporting US goods could be subject to these fees, further exacerbating the financial burden on American exporters.

US port competitiveness and timing challenges

Another critical aspect of the proposal includes a phased requirement that a growing percentage of US exports be transported on US-flagged and US-built vessels. This requirement, starting at 1 percent and rising to 15 percent over seven years, reported Reuters, presents serious logistical challenges given the current capacity of US shipyards, which are ill-equipped to meet such demands.

US ports also face performance issues, with foreign ports consistently outperforming them in efficiency. The competitive disadvantage for US farmers is exacerbated by major agricultural competitors like Brazil and Argentina, who may not be subject to similar fees. Higher transportation costs could shift buyer preferences toward these more cost-effective producers.

Conclusion

The introduction of port fees by the US highlights the country's failed attempts at shoring up its own failing competitiveness. While addressing China's dominance in global shipbuilding and logistics is an important policy goal, these measures could impose significant near-term costs on US agriculture and negatively affect international trade relationships. Farmers and ranchers domestically and internationally are already operating on tight margins, and would face higher freight rates, reduced competitiveness, and potential loss of market share – all while US shipbuilding capacity remains years away from scaling up.

(Cover via VCG)