Have you ever ever seen a US-flagged cruise ship? Likelihood is, 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 Inside Income Service (IRS) – and as an alternative make outsiders pay, together with even calling out cruise traces.
“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 need to 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 international alcohol. No taxes. That is going to finish beneath Donald Trump.”
Price Studying: What’s the Passenger Vessel Providers Act and How Does it Affect Cruises?
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 have been additionally each affected, each dropping as a lot as 7%.
Most specialists are saying there was a large overreaction to the remark made by Lutnick – a lot so they might advise it as a superb shopping for alternative for buyers.
The cruise business has been booming because the 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 traces have headquarters in Florida – however are additionally included in different international locations reminiscent of Liberia and Panama – permitting them to be exempt from paying taxes on US-sourced revenue.
President Trump needs to vary this, however up to now, no additional plans have been shared publicly. There are a lot of choices for cruise traces shifting ahead to stay unaffected by the advised tax improve.
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By now, you might be questioning in case your cruises are about to value extra. I’ve some excellent news – there’s a excellent probability this gained’t occur.
A workforce of analysts led by leisure business professional Steven Wieczynski shared some reassuring data – citing that it’s in regards to the tenth time previously 15 years a politician talked about altering the tax construction within the cruise business.
In addition they famous that each time it has been talked about, it has by no means made it very far.
Most enterprise performed on cruise ships occurs in worldwide waters, making it practically inconceivable for any nation to actually goal the cruise traces immediately.
When new taxes are imposed by international locations, the price normally falls on the passenger.
In order that implies that any passenger on a US-flagged – together with US residents – would really need to pay extra for his or her cruise fare. Discuss a lose-lose scenario!
Presently, the one cruise ship that’s US-flagged and registered within the nation is Delight of America, operated by Norwegian Cruise Line. There are additionally numerous smaller traces that cater to lakes and rivers throughout the US.
Learn Additionally: Mexico Decides to Delay New Cruise Tax Charge
Cruise traces really pay a major quantity of taxes and costs within the US – practically $2.5 billion yearly, which is about 65% of the entire taxes that cruise traces pay worldwide.
The query stays on why the US authorities would make a remark that might drive the business away – as cruise traces can transfer their headquarters and take jobs elsewhere if want be.
If it turned required for cruise traces to have US-flagged ships or pay taxes primarily based on their headquarters places, then there is likely to be some pricing adjustments. Till then, it’s easy crusing.
