Trump is drafting an executive order that would rely on funding from a U.S. Trade Representative proposal to levy fines of up to $1.5 million on China-made ships or vessels from fleets that include ships made in China.

Those potential port fees have limited the availability of ships needed to move agriculture, energy, mining, construction and manufactured goods to international buyers, according to major U.S. exporters and transportation providers in interviews with Reuters, letters to U.S. officials, and comments ahead of USTR hearings next week.

High-profile containership operators and their retail and manufacturing customers have been vocal about the potential harm from the fees. Experts warn that the bulk and tanker ships that move basic goods like food and fuel could be more exposed because they cannot spread the cost among dozens of customers like container carriers can.

Ability to ship agricultural goods

U.S. farmers, who are already getting pummeled by retaliatory tariffs from China, Mexico and Canada, are caught in the crossfire of the Chinese ship fee fight, the American Farm Bureau Federation said.

The inability to secure ocean freight transportation from May and beyond has restricted their ability to sell bulk U.S. agricultural products like corn, soybeans and wheat because exporters are unsure what the final cost would be, three U.S. grain export traders told Reuters.

The United States exported more than $64 billion (C$91.7 billion) in bulk crops, bulk animal feed and vegetable oils in 2024, according to U.S. Census Bureau Trade data. The North American Export Grain Association, which represents crop commodities exporters, will participate in next week’s hearing.

Bulk agricultural exporters could face an additional $372 million to $930 million (C$533 million to C$1.33 billion) in annual transportation costs from the fees, the Farm Bureau said. That would represent substantial margin loss in global markets where competitiveness is often determined by mere pennies per bushel.

U.S. agricultural exporters get an edge over global rivals by leveraging a cost-effective and efficient domestic transportation system for moving products to market, said Alexa Combelic, the American Soybean Association’s executive director of government affairs.

“When you add costs to that efficient system, it’s no longer efficient. We no longer have the competitive edge,” Combelic said.

Coal industry threatened

Vessel owners have already refused to provide offers for future U.S. coal shipments due to the proposed USTR fees, Xcoal Energy & Resources CEO Ernie Thrasher said in a letter to U.S. Department of Commerce Secretary Howard Lutnick dated March 12 and seen by Reuters.

Enacting and implementing the proposed port fees could cease exports of U.S. coal within 60 days, putting $130 billion worth of shipments at risk, Thrasher said. He said the fee structure could add up to 35 per cent to the delivered cost of U.S. coal, making it uncompetitive on the global market.

Coal mines in West Virginia are also preparing to lay off miners as unsold coal inventories pile up, Chris Hamilton, CEO of the West Virginia Coal Association, told Reuters.

The proposed fees could also make it harder for the U.S. to export other energy products like oil, liquefied natural gas, and refined fuels, the American Petroleum Institute, the powerful oil industry lobbying group, said in comments submitted to the USTR dated Mar. 10.

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“I’m not taking any options on or off the table,” White House spokesperson Jen Psaki told a briefing when asked about a carbon tax.

Psaki said President Joe Biden believed it was possible to design a carbon tax that would not violate his pledge not to raise taxes on people making $400,000 or less a year (all figures US$).

Some Democrats, including Senator Ron Wyden, have focused on a carbon tax as a possible alternative as Manchin opposes a key measure in the spending bill called the Clean Energy Payment Program (CEPP).

That measure, which would reward power utilities for investing in renewable energy such as wind and solar and fine those who do not, has been backed by Biden to achieve his climate goals including cutting U.S. emissions by about 50 per cent by 2030 compared to 2005 levels but is effectively dead, Congressional sources say.

Manchin indicated a carbon tax was not in play.

“The carbon tax is not on the board at all,” he told reporters. Manchin, a fellow Democrat, is a centrist from West Virginia, the top U.S. coal producing state after Wyoming.

Representative Pramila Jayapal, the chair of the Progressive Caucus, told reporters that a carbon tax did not come up in a meeting she and other Democrats held with Biden at the White House on Tuesday.

Under a carbon tax, the government sets a gradually rising price for each ton of greenhouse gas that polluters emit, incentivizing industries to move to cleaner energy sources.

One source familiar with discussions in Congress around a carbon tax said the Senate finance committee is weighing a fee in the range of $15-$18 per tonne of CO2 that would steadily rise over the years. Much of the revenue would be returned to consumers as cash payments.

With the U.N. climate summit in Glasgow due to begin in less than two weeks, the White House has been making the case that it can reach Biden’s climate goals even if the legislation does not have everything Biden wanted, including the CEPP.

Psaki cited a report from Rhodium Group, an independent research organization, to underscore White House confidence that Biden’s goals can be met.

Biden moved to re-enter the Paris climate agreement on his first day in office, but he had relied on Congress to deliver legislation to deliver a bulk of the emissions reductions he pledged by the end of the decade.

The back-and-forth among his fellow Democrats in Congress over his bills has threatened to undermine his efforts to reassure the world that he can deliver the U.S. national pledge to slash emissions up to 52 per cent below 2005 levels by 2030.

If Congress is forced to drop certain climate measures, the legislation would still take huge steps on global warming with incentives for electric vehicles and expanded tax credits for renewable power such as wind and solar, according to John Larsen, an author of the report.

“I’m much more worried about no deal than trimmed down bills,” he said.

Manchin urged lawmakers to pass the $1 trillion bipartisan infrastructure bill before the wider spending bill and in time for the U.N. climate talks that start at the end of the month.

Progressive Democrats have said the bills should be passed together to ensure that the debate on wider legislation on climate and social programs does not slip into next year, or get abandoned altogether.

“We have the trust in each other, we should be able to vote immediately on the bipartisan infrastructure bill, which is a tremendous piece of legislation for the president to take with him to Glasgow,” Manchin told reporters.

— Reporting for Reuters by Timothy Gardner, Trevor Hunnicutt, Jeff Mason and Valerie Volcovici.

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Trump wrote on Twitter over the weekend that he would issue a permit for the Alaska-Alberta Railway Development Corporation (A2A Rail) project to move Alberta crude 2,570 km to the Alaskan coast, as well as freight in the other direction.

“I will be issuing a Presidential Permit for the A2A Cross-Border rail,” Trump said. He said his decision was based on the recommendation of fellow Republicans Dan Sullivan, a U.S. senator, and Don Young, a U.S. representative. Projects that cross the U.S. border require presidential permits.

The US$17 billion project, which backers hope will be in service by the end of the decade, was first proposed in 2015 by Canadian infrastructure financier Sean McCoshen.

It could carry up to two million barrels of oil per day, along with potash, sulphur and grain that often back up at Canada’s Vancouver port, said Mead Treadwell, A2A’s vice-chair, Alaska.

“The diversity of commodities helps reduce the risk,” he said.

The case for A2A has involved often-congested pipelines that move Alberta crude to U.S refineries. However, new pipelines are now under construction.

Options to move crude from Canada, the world’s fourth-largest producer, are useful, but A2A is “a very challenged project,” said Dennis McConaghy, a former pipeline executive at TransCanada Corp., now known as TC Energy Corp.

Transportation costs to reach Asian or U.S. Gulf Coast refiners would be substantially higher than those involving pipelines, he added.

“This project makes sense if it’s absolutely the last resort,” McConaghy said.

A2A would require numerous regulatory clearances in the U.S. and Canada that would likely take years. Discussions with shippers have not yet happened in depth, Treadwell said. He added that A2A would offer indigenous groups in the area a chance to invest.

Shipping oil by rail has caused several high-profile accidents in both Canada and the United States in recent years.

“At a time when California is banning gas-powered cars and China is pledging to transition off fossil fuels, it’s hard to imagine a bigger waste of money than building a rail line to move oil trains over the melting permafrost,” said Keith Stewart, senior energy strategist at Greenpeace Canada.

The White House did not respond to a request for comment on how soon Trump would issue the permit.

Such a rail link “has been a dream for many generations,” said Alaska Governor Mike Dunleavy in a statement. Funded privately, it would reduce Alaska’s costs of goods and services, he said.

Alberta supports A2A as it would unlock new markets for the province’s exports, said Kavi Bal, senior press secretary for its energy ministry.

— Reporting by Timothy Gardner in Washington and Rod Nickel in Winnipeg.

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In October, the Trump administration sued California for entering a climate agreement with Quebec, saying the state had veered out of its lane in linking with a market in another country and had no right to conduct foreign policy.

The decision by the U.S. District Court for the Eastern District of California this week said the Trump administration had “failed to identify a clear and express foreign policy that directly conflicts with California’s cap-and-trade program.”

President Donald Trump, a Republican, has pursued a policy of maximizing fossil fuel output while slashing environmental regulations. He intends to pull the United States out of the 2015 Paris agreement on climate change.

California, the most populous U.S. state and one of the 10 largest economies in the world, has long positioned itself as a leader on taking action against climate change. It agreed with Quebec in 2013 to link markets that aim to cut emissions of gases blamed for warming the planet.

The Trump administration has suffered several major losses in the courts on environmental issues and energy pipelines. This week a federal judge in California blocked the administration’s plan to roll back a rule that would slash methane emissions from oil and gas operations on federal lands.

The Department of Justice did not immediately respond to a request for comment about the ruling on California’s carbon emissions market.

Environmentalists cheered the decision. “The federal government should be doing everything in its power to fight climate change, not fighting the states that are leading the way,” said David Pettit, a lawyer at the Natural Resources Defense Council

— Reporting for Reuters by Timothy Gardner and Sebastien Malo.

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The Navigable Waters Protection Rule could win political points ahead of the November election for Republican President Donald Trump in the Farm Belt, a key constituency.

Environmental Protection Agency administrator Andrew Wheeler announced the rule at a meeting of the National Association of Home Builders in Las Vegas. It narrows the definition of “waters of the United States” that are protected under the 1972 Clean Water Act from pollutants such as fertilizers, pesticides and mining waste.

It reduces uncertainty and curtails the need for farmers, landowners and businesses “to hire teams of attorneys to tell them how to use their own land,” Wheeler told reporters in a teleconference.

The rule rolls back protections going back decades. Protections now exclude certain types of waterways like seasonal streams and wetlands.

Fourteen states, including New York and California, along with the District of Columbia said the EPA’s proposal would end federal protection for half of the nation’s wetlands and 15 per cent of streams across the country.

The EPA’s panel of scientific advisers, including several appointed by Trump, said last year in a draft report that it was “not fully consistent with established EPA recognized science” to restore and maintain the chemical, physical and biological integrity of U.S. waters.

An administration official on Wheeler’s call said: “science has informed the development of this rule.”

The rule, expected to take effect in days or weeks, will replace the Obama-era Clean Water Rule, which broadly defined the nation’s waters to include ephemeral streams and wetlands. It was rescinded by the EPA last year after industry groups said it was too onerous.

“That was a rule that basically took your property away from you. As long as I’m president, government will never micromanage America’s farmers,” Trump said Sunday in a speech at the American Farm Bureau’s annual meeting in Texas.

‘All-out assault’

Anne Bradbury, CEO of the American Exploration and Production Council, an industry group of independent energy drillers, praised the administration for giving “regulatory certainty to expand and responsibly develop our vast natural resources” in an “environmentally protective way.”

“This new rule gives the flexibility and clarity needed to implement stewardship practices without the threat of government action,” Iowa corn and cow-calf producer Kevin Ross, president of the U.S. National Corn Growers Association, said in a statement.

Farmers, he said, “are committed to protecting the environment and implementing on-farm soil health practices like planting cover crops, reducing tillage and more carefully managing crop residue” and the new rule “will protect our nation’s water and be implemented without confusion.”

Environmental groups took issue with the EPA’s insistence that the ephemeral and other waterways will be adequately protected by state and local regulations and by farmers and landowners.

“This all-out assault on basic safeguards will send our country back to the days when corporate polluters could dump whatever sludge or slime they wished into the streams and wetlands that often connect to the water we drink,” said Janette Brimmer, an attorney with Earthjustice.

— Reporting for Reuters by Valerie Volcovici and Timothy Gardner. Includes files from Glacier FarmMedia Network staff.

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In August, as drought seared the Midwest, the governors of several livestock-producing states including Georgia and New Mexico asked the U.S. Environmental Protection Agency (EPA) to suspend the ethanol mandate. They said it pushed up prices for feed grain and squeezed producers’ profits.

But the EPA decided the relief brought on by freezing the mandate would not be significant and would reduce corn prices only about one per cent.

"We recognize that this year’s drought has created hardship in some sectors of the economy, particularly for livestock producers," said Gina McCarthy, assistant administrator for the EPA’s Office of Air and Radiation.

"But our extensive analysis makes clear that… waiving the (Renewable Fuel Standard, or RFS) will have little, if any, impact."

The EPA determined the mandate did not cause severe economic harm, a requirement for waiving the measure.

Aimed at reducing U.S. reliance on foreign oil, the RFS requires 13.2 billion gallons of ethanol to be made from corn this year. About 40 per cent of the U.S. corn crop is used to make ethanol.

Many oil companies oppose the RFS, saying it adds costs to making gasoline.

Patrick Kelly, a senior policy adviser at industry group the American Petroleum Institute, said the EPA "applied an improper and unnecessary high bar, which makes it questionable if any waiver could ever be granted," and that the RFS had become "increasingly unrealistic and unworkable."

This was the second time that the EPA denied a waiver. In 2008, regulators rejected a Texas petition to halve the mandate temporarily.

Upholding the mandate could benefit ethanol producers such as Archer Daniels Midland and privately held POET.

Corn futures in Chicago were up 3-1/2 cents at $7.24-3/4 a bushel on Friday, reversing early losses after news the government would uphold the mandate, traders said.

— Patrick Rucker and Timothy Gardner cover the financial and energy sectors respectively for Reuters from Washington, D.C.

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The United States will likely fail to reach its long-term mandate for making advanced ethanol from trees, grasses and crop waste unless producers innovate significantly, a scientific advisory group said last week.

The National Research Council’s comments are the latest sign that backers of alternative fuels must wait longer for “next-generation” ethanol. Touted as the motor fuel of the future, it has struggled with high production costs and other setbacks. 

“Absent major technological innovation or policy changes, the… mandated consumption of 16 billion gallons of ethanol-equivalent cellulosic biofuels is unlikely to be met in 2022,” a study by the council said, referring to long-term targets in U.S. law for the biofuel.

The study, which drew challenges from the U.S. agriculture secretary and industry groups, also said cellulosic fuel without subsidies would be feasible only with oil above $190 a barrel, far higher than the current level near $80 (all figures US$).

The council, part of the U.S. National Academy of Sciences which offers scientific advice under a congressional charter, said the U.S. mandate for renewable fuels may be an ineffective policy for reducing greenhouse gas emissions. 

The report itself may not hurt near-term investment in cellulosic production, but the weak economy will, said Pavel Molchanov, an analyst at financial services company Raymond James and Associates.

“There’s no disputing that in this kind of economy with credit markets tight, it’s definitely not easy for advanced biofuel developers to raise large amounts of capital,” he said. 

Fuel of the future?

In June, the U.S. Environmental Protection Agency slashed for the second year running its proposed near-term mandate for cellulosic production set by Congress in 2007 under then-President George W. Bush.

The federal government and producers say the fuel is a way to reduce imports of foreign oil and cut emissions of gases blamed for warming the planet. Next-generation ethanol has also been seen as a way to cap the growth of using corn to make fuel, which has been blamed for pushing up food prices. 

Companies aiming to make cellulosic ethanol or provide enzymes that break down its feedstocks include DuPont’s Genecor, Abengoa Bioenergy, Qteros and Novozymes A/S. Despite years of work, there are not yet any commercial-scale plants to make cellulosic ethanol. 

The U.S. mandate calls for 15 billion gallons of ethanol made from traditional sources such as corn, 4 billion gallons of advanced biofuels, other than ethanol derived from corn, and 16 billion gallons of cellulosic from sources including wood, grasses or crop waste by 2022.

U.S. producers made more than 13 billion gallons of corn ethanol last year, using about 40 per cent of the corn crop in the process. So the long-term goal of 15 billion gallons of traditional ethanol should be achievable, the study said. 

It’s unclear whether some cellulosic fuels would lower greenhouse gas emissions because of the carbon dioxide that would be produced when new land is cultivated to grow feedstocks, said Wally Tyner, an agriculture economics professor at Purdue University who helped work on the study.

For example, if expanding biofuels involves plowing up perennial vegetation on a piece of land and replacing it with an annual crop, that could disrupt future potential for storing carbon in biomass and soil, the study said. 

Critics

The study had plenty of critics, from government to industry groups. The Renewable Fuels Association said the work “largely assesses ethanol and other biofuels in a vacuum and fails to appropriately compare the costs and benefits of renewable fuels to the impacts of the marginal petroleum sources they are displacing.”

Virginia Dale, a biofuels fellow at the Oak Ridge National Laboratory in Tennessee who helped produce the study, said it did not use the most recent government data available and used models not specifically designed for biofuels, so cost estimates for producing some biofuels may be exaggerated. 

“We didn’t always use the available data, the current data.”

Tom Vilsack, the U.S. agriculture secretary, agreed. “The study overlooks many of our recent efforts, including new investments in research and technologies to develop non-food feedstocks,” he said.

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