CNBC’s Lori Ann LaRocco reports on new U.S. tariffs raising costs for Chinese fleets and the ripple effects threatening China’s financial institutions.

Beijing

The U.S. government has implemented new port fees and increased tariffs on Chinese-made freight vessels, cranes, and related equipment, with some rates reaching as high as 270 percent. These measures, including a significant rise in crane tariffs and additional levies on lumber and furniture, are expected to have a substantial impact on home builders, furniture companies, and the broader shipping industry.

Chinese shipping companies and banks are particularly affected, as many vessels are financed through Chinese lenders. The exposure of Chinese banks is considerable, with a leasing portfolio valued at $148 billion. Shipping companies are now seeking alternative financing arrangements to avoid being classified as Chinese entities under the new U.S. rules. Industry representatives have raised concerns about the inflationary pressures and uncertainty these measures introduce to global supply chains.

U.S. port fees hit China’s shipping sector, spark concern for Chinese banks

We are just a couple hours away from new U.S. government port fees kicking in for Chinese-made freight vessels, but importers are already grappling with additional levies rolled out on Friday, which could put the new tariff rate as high as 270 percent. Now, CNBC's global supply chain reporter Laurie Anne La Rocco has more on this. Hey, Laurie. Good morning, Martin. Thanks. So we are looking at a quintuple tariff hit. You've got that right, quintuple. We have a great chart here for the audience kind of breaking it all out. So we start with the tariffs on lumber, which is 10 percent, as well as a 25 percent tariff on kitchen cabinets and furniture. This is really going to impact the home builders and, of course, the furniture companies out there. I mean, you know, it's one thing after another. And these are going to be layered on top of additional tariffs that they're already facing. Moving on to the next set of tariffs, we are looking at the third wallop, and that is the USTR port fees that the audience is very, very familiar with over in China. It's actually in two buckets when you're looking at the Chinese vessels. The first are vessels owned and operated by a Chinese entity, as well as made in China. And China State Shipbuilding Corporation, Ocean Carriers or OOCL, and Costco fall into this category. Now, to get a sense of the fees, they are charged five times a year. And when you look at the container ship size of Costco, a one-time fee, Martin, would be over $16 million with that voyage. And so multiply that by five, and that is a lot of money. Looking at the second tier, these are just the Chinese-made vessels. And China is the largest shipbuilder in the world, followed by South Korea. And so when you look at the impact here, it is quite vast. Ocean carriers have been able to, though, plan ahead and move some of the Chinese vessels out of rotation coming into the United States, so they would have less exposure. But if they are paying a fee here, you're looking at $10 million a year, and that's five times a year. So again, that adds up. Now, what just dropped on Friday was the USTR increase in crane fees, which is now 150%. Laid upon that, that is where the 250% tariff falls into place. And I've spoken with port operators and associations that represent them, and they are very concerned about this because this is inflationary pressures. And so again, this is in retaliation because China also makes the majority of cranes. The United States does not have that ability as yet. And so supply chain officials are telling me, when you're looking at those type of fees, be it the port fees, the crane fees, the roll-on, roll-off vessels, they are now going to be charged more. There's a lot there. So, Lorianne, which sort of begs the question, what about the pass-through? Are carriers passing these costs on? And if so, how much? And, you know, when you take a look at the disparity in shipbuilding capacity between the US and China, I think China outguns the US, I think, 200 to 1. You stretch this out to, say, four or five years, and the picture could be very different. Most definitely. And as of right now, none of the ocean carriers are going to be passing over these costs, including the Chinese-owned and operated, which are being penalized the most. But it's over the long term that you identify. In about five years, the majority of all the new vessels coming on to the market are Chinese-owned and operated. And by then, we'll see if such charges are going to be added into the logistics price for the US importers. Lorianne, real quickly before we let you go, shipping companies, they are starting to change, I guess, their financing structures, also their headquartering, trying to get better financing deals. Chinese banks, how exposed are they to all this? Chinese banks are really exposed to this area, which is why I think we really saw these countermeasures from the Chinese government. You're looking at $148 billion in the Chinese leasing portfolio. That's from Petrofin Bank Research. And it's a lot of money there. And what's happening is, ocean carriers, they finance through these Chinese lenders to fund their new vessels. So now with this new USTR ruling, they don't know if they lump in as a Chinese entity because of that finance deal, which is why they are now trying to claw back, if you will, you know, leave the Chinese lender and then pick up a new lender in the Western or in Europe to avoid such confusion. But the USTR has not gotten back to me in terms of trying to clear this up. But this is a very large exposure for the Chinese banks. And in fact, the lessors have to go to the government in order to see if they have to, if they can actually end such a financial agreement.

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