Cruise lines might find themselves in the crosshairs of the Trump administration.
U.S. Secretary of Commerce Howard Lutnick said in a Fox News interview Wednesday that cruise operators will pay more in taxes under the Trump administration.
"You ever see a cruise ship with an American flag on the back? They have flags of like, Liberia or Panama. None of them pay taxes," he said, calling out imported wine and spirits, as well. "This is going to end under Donald Trump and those taxes are going to be paid and Americans' tax rates are going to come down."
In response to Lutnick's
comments, the Cruise Lines International Association (CLIA) said lines pay nearly $2.5 billion in taxes and fees in the
U.S. -- an amount representing 65% of the total taxes cruise lines pay worldwide.
CLIA said the cruise industry
contributed $65 billion to the economy in 2023, supporting 290,000 U.S. jobs.
Stock prices take a hit
Lutnick's comments led cruise stocks to tumble on Thursday.
"We see the initial reaction in the stocks as a knee-jerk overreaction for a sector that has performed extremely well over the past two years, but we cannot rule out the possibility that such a tax may be imposed," said Patrick Scholes, a cruise industry analyst at Truist Securities.
It's unknown whether the government would be able to compel cruise companies to pay U.S. income tax, and if so, at what percentage of their income and at what rate, as much of their operations do not come in contact with the U.S, he said.
Vince Ciepiel, an analyst at Cleveland Research Company, noted cruise operators pay payroll taxes, port fees and other costs and suggested the most plausible tax increase for cruise lines would be to raise port fees.
The cruise industry's exemption from most U.S. income tax has periodically come under fire in Congress, including in 2017.
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This report was updated on Feb. 20 to add a comment from CLIA.