Have you ever ever seen a US-flagged cruise ship? Likelihood is, you most likely haven’t – however this might all be altering quickly.
On February 19, 2025, US Commerce Secretary Howard Lutnick steered 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.
Widespread 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 price.
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 have to be residents.
Lutnick added, “None of them pay taxes … each supertanker. None pay taxes … all international alcohol. No taxes. That is going to finish underneath 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 nearly 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 an excellent shopping for alternative for buyers.
The cruise trade 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 nearly 400% – and Carnival Cruise Line’s up 205%.
These cruise traces have headquarters in Florida – however are additionally included in different nations resembling Liberia and Panama – permitting them to be exempt from paying taxes on US-sourced earnings.
President Trump needs to alter 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 steered tax enhance.
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By now, you could be questioning in case your cruises are about to price extra. I’ve some excellent news – there’s a excellent probability this received’t occur.
A workforce of analysts led by leisure trade knowledgeable Steven Wieczynski shared some reassuring info – citing that it’s concerning the tenth time prior to now 15 years a politician talked about altering the tax construction within the cruise trade.
Additionally 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 unattainable for any nation to actually goal the cruise traces instantly.
When new taxes are imposed by nations, the associated fee often falls on the passenger.
In order that signifies 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 Delight of America, operated by Norwegian Cruise Line. There are additionally varied smaller traces that cater to lakes and rivers throughout the US.
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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 overall taxes that cruise traces pay worldwide.
The query stays on why the US authorities would make a remark that would drive the trade away – as cruise traces can transfer their headquarters and take jobs elsewhere if want be.
If it grew to become required for cruise traces to have US-flagged ships or pay taxes based mostly on their headquarters areas, then there is perhaps some pricing modifications. Till then, it’s clean crusing.
