TORONTO — Shares of major cruise lines dropped on Thursday after U.S. Commerce Secretary Howard Lutnick suggested that the Trump administration could impose stricter tax policies on the industry.
During an interview on Fox News Wednesday night, as reported in consumer news outlets including CNBC, Lutnick questioned the current tax status of cruise companies.
“You ever see a cruise ship with an American flag on the back?” he asked. “None of them pay taxes … every supertanker. None pay taxes … all foreign alcohol. No taxes. This is going to end under Donald Trump.”
Following these remarks, shares of Carnival fell 5.9%, Royal Caribbean dropped 7.6%, Norwegian Cruise Line declined 4.9%, and Viking Holdings slipped 3%.
Analysts Call Reaction Overblown
Analysts at Stifel Financial characterized the market reaction as excessive and advised investors to view the selloff as a buying opportunity.
“This is probably the tenth time in the last 15 years we have seen a politician (or other D.C. bureaucrat) talk about changing the tax structure of the cruise industry,” wrote Stifel analysts led by Steven Wieczynski, as reported by CNBC. “Each time it was presented, it didn’t get very far.”
The firm noted that cruise lines are categorized alongside the cargo shipping industry for U.S. tax purposes, meaning any changes would likely impact a much larger sector. “That would mean the entire cargo industry would have to be turned upside down even before they got to the cruise industry, which is a sliver of the size of the cargo industry,” the report stated.
Additionally, analysts suggested that if stricter tax regulations were imposed, cruise operators might relocate their headquarters outside the U.S., potentially affecting American jobs. With the majority of their business conducted in international waters, enforcing new tax policies could prove challenging.
Stifel maintains buy ratings on six cruise stocks: Carnival, Royal Caribbean, Norwegian, Viking, Lindblad Expeditions Holdings, and OneSpaWorld Holdings.
Industry Responds to Tax Debate
The Cruise Lines International Association (CLIA) defended the industry’s contributions, stating that cruise operators already pay substantial fees in the U.S.
“Cruise lines pay nearly $2.5 billion in taxes and fees in the U.S., representing 65% of the total taxes they pay globally, despite only a small portion of their operations occurring in U.S. waters,” the CLIA said in a statement. “Foreign-flagged ships that visit the U.S. are treated the same for taxation purposes as U.S.-flagged ships visiting foreign ports, ensuring consistent international treatment.”
