THERE is a range of reactions in the shipping industry to the US port fee plan. On one end: This is so ridiculous and self-defeating that it’s impossible for it to go forward. On the other: Look at what’s happened in the first two months of Trump 2.0 — anything is possible.

There are examples of unintended consequences in every shipping lane. One of the most extreme cases is in the Caribbean, where the US Trade Representative plan, if approved as written, would be devastating.

The USTR port fee plan would charge $500,000-$1m for every US port call by an operator with Chinese-built ships in its fleet, regardless of vessel size.

This is a triple whammy for the Caribbean, which is uniquely vulnerable to fee fallout. Caribbean services use a very high percentage of Chinese-built tonnage, shortsea routes lead to a very high number of US port calls per year, and vessels in the trade have very low capacities, inflating the port fee cost per container.

The US port fee plan, which is partially designed to punish China, would push the Caribbean to buy more goods from China. US ship operators and exporters would lose out. Caribbean businesses and residents — and American tourists — would be caught in the crossfire.

Why Caribbean is so vulnerable

The Caribbean islands, due to the nature of the trade and the port facilities, are served by small containerships. These vessels are operated by US-owned businesses in Florida. The members of the Caribbean Shipowners Association (CSO) — Crowley, Hybur, King Ocean, Seaboard Marine and Tropical Shipping  — have 56 vessels serving the islands, ranging in size from 170 teu to 1,300 teu.

A $1m fee equates to $400 per feu per call for a 5,000 teu vessel in east-west trades serving larger US ports. A $1m fee equates to $2,000 per feu per call for a 1,000 teu ship in the Caribbean, and $4,000 per feu for a 500 teu ship.

The Caribbean market is heavily reliant on Chinese-built tonnage, simply because China is the primary builder of small containerships. Using Chinese-built ships in the Caribbean is effectively unavoidable.

Chinese-built ships comprise 45% of the aggregate fleet of CSO member lines. According to data from Lloyd’s List Intelligence, 51% of containerships in operation with capacity of 500 teu-1,999 teu were built in China, and 75% of containerships on order with capacity of 2,999 teu or less are being built in China.

Data on 2024 containership calls at all US ports shows that those with capacity of 1,000 teu-1,999 teu were by far the most heavily weighted toward Chinese-built tonnage — at 61%. These are largely the ships serving the Caribbean out of Florida.

In contrast, the Chinese-built share is less than one-fifth of that, just 11%, for the 5,500 teu-9,999 teu containerships that predominate in the higher-volume Asia-US trades.

Florida ports handle a disproportionately higher number of calls by Chinese-built vessels due to the preponderance of small containerships constructed in China, as well as the high frequency of calls, given the short sailing distance to the islands.

According to Lloyd’s List Intelligence data, three Florida ports — Port Everglades, Miami and Palm Beach — are among the top 10 US ports measured by the number of Chinese-built ship calls in 2024 (including all segments: containerships, bulkers, tankers, etc.).

In 2024, 94% of all calls in Palm Beach were by Chinese-built ships, versus only 19% in Los Angeles. Palm Beach handled more calls by Chinese-built ships than Los Angeles, even though Los Angeles had five times as many total calls and reported 36 times more teu throughput.

Impact on US businesses and Caribbean economies

US ship operators serving the Caribbean have filed comments with the USTR on the port fee proposal, stating that they could not survive it.

Seaboard Marine said the port fee “would have the unintended consequence of putting US-owned carriers like Seaboard Marine out of business”. The company’s chief executive, Edward Gonzalez, testified at the USTR hearing in Washington, DC, on Monday.

The CSO estimated that aggregate port fees charged to its member lines would be as high as $69m per week, or $3.6bn per year — “more than five times the total gross revenue of the CSO members in the CSO trades during 2024”.

“It is self-evident that this enormous cost cannot be absorbed by the CSO members. If the proposal is implemented as drafted, the CSO members are faced with the choice of going out of business, passing the increased cost on to their customers, and/or radically changing the way they do business.” 

The Caribbean trade is very different from the broader US container shipping market. In other US markets, container trade is heavily weighted towards imports, meaning that most of the port fees would be passed along via surcharges to US businesses bringing cargo in.

In the Caribbean trade, outbound volume from the US is 12 times higher than inbound volume, according to the CSO. Ship operators would need to pass the port fee cost along to US exporters, which in turn would have to pass it along to buyers in the Caribbean.

The surcharge for US exporters transporting goods to the Caribbean would be much higher than the surcharge for US importers with boxes arriving at larger US ports on board larger vessels, because the USTR fee would be spread over many fewer containers per call in the case of the Caribbean trade.

“A significant portion of the export cargo carried by our members is destined for hotels, resorts and cruiseship providers serving the Caribbean,” said the CSO. If the cost of exports increased, the cost paid by US vacationers in the islands would have to increase.

The Caribbean population is also heavily reliant on US exports of food.

Florida’s ports handle more containerised US grocery exports than any other state, with those boxes bound for the islands. The ports of Jacksonville, Port Everglades, Miami and Palm Beach account for a combined 36% of total US containerised exports of grocery items, according to data from the US Department of Agriculture.

The Caricom (Caribbean Community) Private Sector Organisation said the US port fee plan would have “devastating implications for the cost of food imports” and would “raise the cost of imports to astronomical levels, crippling economic activity. The social and economic ramifications of such measures by the United States are unthinkable.”

Caribbean businesspeople filed numerous comments to the USTR, all negative.

Among the responses: “This tax will kill us.” It will “destroy services to the Caribbean”. “This will affect millions of people.” “You can expect Puerto Rico and the US Virgin Islands to just shut down and we will have to move to the mainland.” “This proposal will be devastating.” “Just stop and think for a moment how ridiculously stupid this idea is.”

Caribbean buyers already looking for non-US sources

Caricom said that 43% of goods imports of its island members come from the US. However, there are options to shift to other suppliers.

The Caribbean region has seven large container transhipment hubs: MIT, CCT and Cristobal on the Atlantic side of Panama; Cartagena, Colombia; Kingston, Jamaica; Caucedo in the Dominican Republic; and Freeport in the Bahamas.

High-capacity containerships in Asia-US east coast service and Europe-South America service call at these hubs en route, dropping off cargoes for final delivery to the islands. The Caribbean also sources goods directly from Central and South America.

Tropical Shipping chief executive Tim Martin, who testified at the hearing on Monday, said in his submission to the USTR that the port fee proposal would “raise the cost of goods exported from the US to the Caribbean, which would cause a shift in the $92.3bn export business away from the US to other countries”.

Preparations for this shift are already underway.

The mere threat of the US port fees has driven some Caribbean importers to explore other options, said David Ross, founder and chief executive of Florida-based freight forwarder CFL Agencies USA, in an interview with Lloyd’s List.

“About 60% of our business is in and out of the US. The other 40% is global. We move cargo from Asia and China into the Caribbean and Central America. We move it from Turkey, Europe and Brazil. We’ve got agents all over the world. All of that stuff flows directly into the Caribbean without coming through any US port.

“Our business from Asia and China into the Caribbean is growing at a fast clip. Its also growing out of Europe and out of Brazil.”

Ross said the Caribbean has already had two “practice runs” for replacing US exports. “During Covid, when things were shutting down in the US and people couldn’t get some supplies in the islands, we saw buying patterns shift to Central America, Brazil and Europe. We also saw it with the ILA [International Longshoremen’s Association] strike.”

Customers are reacting to the USTR port fee plan by frontloading and looking at alternative sources.

“The conversation with our customers is: ‘If you’re going to buy it, buy it now’,” said Ross. “Make sure you get it, because we don’t know what the impact will be. Maybe nothing happens at all, but if you don’t get it now, you might not be able to afford it later.

“Our customers are also looking at whether they can buy products somewhere else: who the supplier is, what the price is, what it costs to ship it. These conversations are happening now.

“They are not waiting [for the final USTR decision]. You could say: ‘This is not going to happen’, but an astute businessman will say: ‘What if it does?’ I don’t think anyone is just assuming this is not going to happen. They are unsure about what’s going to happen, so they are thinking about how they will figure this out.

“The Covid experience and the strike experience geared people in the Caribbean to find other options when they see something like this on the horizon. They’re saying: ‘If I can’t buy it here, I’ll buy it over there’.”