In April, the U.S. Trade Representative’s Office announced the launch of a 301 inquiry into China’s shipbuilding, shipping and logistics industries and decided to impose an additional port service fee on ships owned, operated or manufactured by Chinese companies as of October 14.The U.S. appears to have claimed that this was to “correct unfair competition”, but essentially a phase-out barrier that forced Chinese ships to reduce their dependence on ports, thus suppressing China’s competitiveness in global shipping.
The charging standard is the highest in history. It starts at US$50 per net ton and gradually rises to US$180 within three years. Based on a 100,000-ton oil tanker, an additional US$5 million will be paid for a single call to the port. This is almost equivalent to the entire profit of a transoceanic shipment. Trump originally thought that charging China ships could kill two birds with one stone, which would not only suppress the competitiveness of China's shipbuilding industry, but also "breathe a sigh" for the long-declining shipbuilding industry in the United States.
But he obviously underestimated the speed and strength of China's counteraction. Just before the U.S. measures had not officially landed. On October 10, the Ministry of Transportation of China announced that from October 14, the "special port charges" are imposed on ships owned, operated, built or hanged under the U.S. flag by U.S. entities, with the standard starting at 400 yuan per net tonne, and increasing year by year, eventually increasing to 1120 yuan per net tonne. In other words, whoever starts, whoever has to bear the same price. China's counteraction is not only accurate, but also phased, limited frequency, a ship charges up to five flights a year, with both strength and rhythm.
The first to feel the impact on the outside world were American shipping and energy giants. China makes almost half of the world's ro-ro ships and liquefied natural gas carriers, while the United States relies on chartering foreign ships for 80% of its LNG exports. When the US charging order was issued, it was equivalent to directly placing a cost constraint on its own energy companies. The American Automobile Dealers Association took the lead because most imported cars are transported by car carriers built in China. Once costs increase, the increase in costs will be transmitted to the end market, and inflationary pressures will rise. Energy companies are complaining even more. Natural gas prices have just stabilized and will be pushed up due to rising freight rates.
After seeing China's countermeasures, Trump realized that the "trade head" he pulled out, struck not China's arteries, but the United States itself. Especially after China's announcement of countermeasures, the global shipping market quickly showed a chain reaction. According to Alphaliner's calculations, China's tariff standard came out, the trans-Pacific shipping price rose 7% on the day, some cargo ships carrying coal, iron ore and even canceled the cabin. The US originally expected to force China's shipbuilding industry to concession through tariffs, but instead let U.S. ports and importers first feel the repression.
Thus, on the eve of the official entry into force of the port fee on October 14, the U.S. Trade Representative’s Office urgently announced changes to the policy, reducing the original tariff standard from $150 per net tonne to $46 and reducing the rate by 70%. At the same time, the exemption clause was increased, allowing for the long-term lease of natural gas and liquefied oil gas ships to be exempt from charges.
And Trump's retreat was not only due to economic pressure, but also to a balance of political benefits and disadvantages. Only a few weeks before the APEC summit, he urgently needed to release a signal of mitigation in order to create an atmosphere for a possible meeting of China-U.S. leaders. After all, since China suspended the procurement of U.S. soybeans, turning to the South American market, the direct loss of U.S. farmers and agricultural exports fell by 20%.
Against this background, the three pillar industries of agriculture, energy, and shipping simultaneously put pressure on the government to adjust its China policy. Faced with the chain reaction from home, the president of the United States, who calls himself a "negotiating artist", had to recalculate the price. Instead of letting the entire supply chain pay for his aggressiveness, it was better to take a half step back temporarily and leave room for manoeuvre for subsequent negotiations.
Now the pattern is clear, and Trump has seen the combination of China's hard power and soft wisdom. The fee has been reduced from US $150 to US $46, which seems to be a small adjustment, but it reflects the balance of power in the game between big powers. China didn't win respect by shouting, but won the initiative by precise counter-measures. Trump may be able to order the revision of the document, but he can't change a reality. In this reciprocal game, China is no longer passively beaten, but is shaping the negotiation order with rules and strength.