Have you ever ever seen a US-flagged cruise ship? Chances are high, you in all probability haven’t – however this might all be altering quickly.
On February 19, 2025, US Commerce Secretary Howard Lutnick advised throughout a Fox Information interview that President Donald Trump plans to abolish the Inner Income Service (IRS) – and as a substitute make outsiders pay, together with even calling out cruise strains.
“You ever see a cruise ship with an American flag on the again?” Lutnick identified.
Frequent flag etiquette is to fly the flag of each nation a cruise ship visits – however most don’t fly the American flag because it comes with a excessive value.
Sometimes, a ship’s “flag of comfort” – which is the place the ship is registered – is in a rustic with higher legal guidelines and decrease taxes than the US.
Additionally, crew members on US-flagged vessels must pay US federal taxes – plus, there are strict necessities stating that almost all of the employees should be residents.
Lutnick added, “None of them pay taxes … each supertanker. None pay taxes … all overseas alcohol. No taxes. That is going to finish below Donald Trump.”
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Within the wake of this remark, cruise shares took fairly the hit because the market opened Thursday.
Carnival Cruise Line’s shares took the smallest hit all through the day, dropping solely about 5%. Royal Caribbean dropped virtually 9.3% early on, however ended the day down 7%.
Norwegian Cruise Line and Viking Cruises had been additionally each affected, each dropping as a lot as 7%.
Most consultants are saying there was a large overreaction to the remark made by Lutnick – a lot so they might advise it as shopping for alternative for buyers.
The cruise trade has been booming for the reason that finish of the COVID-19 pandemic – because the lifting of mass quarantines introduced a rise within the demand for journey.
Shares have been on the rise since 2022 – Royal Caribbean’s up virtually 400% – and Carnival Cruise Line’s up 205%.
These cruise strains have headquarters in Florida – however are additionally integrated in different international locations equivalent to Liberia and Panama – permitting them to be exempt from paying taxes on US-sourced revenue.
President Trump desires to alter this, however to date, no additional plans have been shared publicly. There are various choices for cruise strains shifting ahead to stay unaffected by the advised tax enhance.
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By now, you could be questioning in case your cruises are about to value extra. I’ve some excellent news – there’s a excellent likelihood this gained’t occur.
A staff of analysts led by leisure trade skilled Steven Wieczynski shared some reassuring data – citing that it’s in regards to the tenth time up to now 15 years a politician talked about altering the tax construction within the cruise trade.
In addition they famous that each time it has been talked about, it has by no means made it very far.
Most enterprise carried out on cruise ships occurs in worldwide waters, making it practically not possible for any nation to really goal the cruise strains instantly.
When new taxes are imposed by international locations, the associated fee normally falls on the passenger.
In order that implies that any passenger on a US-flagged – together with US residents – would really must pay extra for his or her cruise fare. Speak about a lose-lose state of affairs!
Presently, the one cruise ship that’s US-flagged and registered within the nation is Pleasure of America, operated by Norwegian Cruise Line. There are additionally numerous smaller strains that cater to lakes and rivers throughout the US.
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Cruise strains really pay a big quantity of taxes and costs within the US – practically $2.5 billion yearly, which is about 65% of the entire taxes that cruise strains pay worldwide.
The query stays on why the US authorities would make a remark that might drive the trade away – as cruise strains can transfer their headquarters and take jobs elsewhere if want be.
If it grew to become required for cruise strains to have US-flagged ships or pay taxes primarily based on their headquarters places, then there could be some pricing modifications. Till then, it’s clean crusing.
