The office of the United States Trade Representative’s proposal to implement fees of up to $1.5 million on Chinese-made ships entering U.S. ports is proving to be unpopular, to say the least.
Most testimonies during the public hearing on March 24 opposed USTR’s proposed remedies, which also include penalties on operators ordering from China and U.S.-flagged shipping mandates.
- The proposal is part of the USTR’s investigation, which initially began in 2024 and has been conducted under Section 301 of the Trade Act of 1974, into China’s dominance in the global shipping sector.
Concerns raised during the hearing were increased costs, supply chain disruption, impact on agriculture and a lack of direct benefit to U.S. shipbuilding. Many pointed out that the U.S. shipbuilding sector lacks capacity to replace Chinese-built vessels anytime soon, making the policy more punitive than productive.
The promotional products industry wouldn’t be immune to the negative impact.
- Suppliers would face higher production and logistics costs, reducing profit margins.
- Distributors would have to pass on the increased costs to end buyers, making branded merchandise less attractive for corporate campaigns.
A major sticking point is that USTR’s proposed remedies would increase shipping costs by 8% to 14%, leading to higher prices for imported goods, according to a new study by Trade Partnership Worldwide, which was supported by PPAI and nearly 30 other associations, including the American Apparel & Footwear Association, Consumer Technology Association and National Retail Federation.
Instead of imposing broad fees, there were recommendations during the hearing for alternative approaches such as:
- Tax incentives and subsidies for U.S. shipbuilding to improve competitiveness.
- Targeted trade agreements to address concerns about China’s subsidies without harming U.S. businesses.
- Delays or phased implementation to allow industries time to adjust.
- Exploring exemptions for non-Chinese operators to avoid unintended consequences.
“PPAI strongly urges USTR to consider the unintended economic consequences of the proposed Section 301 remedies, particularly their strain on U.S. supply chains, cost structures and business operations,” Drew Holmgreen, president and CEO of PPAI, said in comments submitted to USTR ahead of the hearing.
Drew Holmgreen
President & CEO, PPAI
“While these measures are intended to support domestic shipbuilding, they risk creating higher costs for importers, disrupting logistics networks and weakening the competitiveness of industries that rely on global trade, including promotional products.”
View PPAI’s comments to the USTR below.
Economic Devastation
USTR’s proposed remedies would reduce U.S. GDP by up to $6.2 billion, according to the study.
- Exports would decline by up to $21.4 billion, worsening the U.S. trade deficit.
- Industries that rely on cost-effective shipping, including manufacturing, retail and agriculture, would experience higher costs and lose the ability to remain competitive.
Alok Bhat
Market Economist, Research & Public Affairs Lead, PPAI
The new study also suggests that port traffic could decline by up to 11%, as shipping companies reroute through Canada or Mexico to avoid fees. As a result, U.S. warehousing and trucking jobs would be lost due to reduced port activity and the price of everyday goods would rise due to supply chain disruptions.
- Distributors using on-demand print and fulfillment services could see delays in processing and shipping customer orders, according to Alok Bhat, market economist, research and public affairs lead at PPAI.
- Meanwhile, suppliers storing bulk inventory in West Coast fulfillment centers may face higher handling fees as warehouses adjust to fewer shipments.
“Most of PPAI’s nearly 15,000 members are small and mid-sized businesses, meaning they lack the purchasing power to absorb rising costs like large corporate brands can,” Bhat says. “Larger distributors and suppliers may secure better freight rates, leaving smaller competitors at a disadvantage. Independent distributors may lose contracts if corporate buyers see the costs of promotional product rise significantly.”
See the full study below.
PPAI’s Stance
PPAI urges policymakers to pursue alternative solutions that strengthen U.S. manufacturing and supply chains without creating additional burdens for businesses that rely on international trade.
In addition to supporting the new study, PPAI joined more than 260 trade associations in signing a coalition letter to USTR, opposing the proposed Section 301 China shipbuilding remedies. The letter is below.
