Does More Cruise Ship Taxes Threaten Cruising As We Know It?

Few executives face existential threats to their industry as frequently as cruise ship marketers have lately. While they are still reacting to high fees, restrictions, and outright bans from some of their most desirable ports, they now face another threat: taxes on their ships in U.S. ports.

Earlier this week, Commerce Secretary Howard Lutnick said the Trump administration would increase taxes on foreign-flagged cruise ships.

“You ever see a cruise ship with an American flag on the back?” Lutnick said. “None of them pay taxes … every supertanker. None pay taxes… No taxes. This is going to end under Donald Trump.”

Lutnick’s comments suggest that either the administration will push for much higher taxes on cruise ships visiting U.S. ports or for cruise lines to use ships registered in the U.S.

Are New U.S. Taxes an Existential Threat to Cruising?

It’s been a tough start in 2025 for cruise marketers. There has been bad publicity about viral outbreaks on ships being the highest in ten years. That’s a minor blip, though, compared to other issues.

Less than a month ago, I described a looming threat to cruise lines. Some of their most iconic destinations are taxing, restricting, or even banning cruise ships. This includes aspirational and photogenic ports like Venice, Barcelona and Santorini. Marketers selling the dream vacation populate their brochures with images from these picturesque locations.

In part to counter the challenges from ports trying to fight over-tourism, the cruise industry is investing in enormous ships that function as floating resorts. Most commonly, these ships sail from ports in Florida and Texas to visit ports and private islands owned by the cruise lines.

If the taxes on foreign-flagged ships sailing from U.S. ports are high enough to significantly change the cost per passenger, those taxes put this mega-ship strategy at risk.

Why Do Lines Register Their Cruise Ships in Other Countries?

Almost all cruise ships fly flags from countries like The Bahamas and Panama. The companies themselves may have U.S. headquarters but be incorporated elsewhere. Carnival Corporation, for example, is listed on the NYSE and LSE. It has its headquarters in Miami, but is actually incorporated in Panama.

The first major obstacle to U.S. flagged cruise ships is that by law they must be built in the United States. There are no shipyards in the U.S. currently capable of building cruise ships, particularly the mega-ships that are most in demand. These come from European shipyards in countries like Finland, France and Italy.

Another, even greater, obstacle is the requirement that U.S. flagged ships have an American crew and apply American labor law.

Why Do Cruise Ships Employ So Few U.S. Workers?

The appeal of cruising for most people who book cruises is that the ship experience offers a high service level at a moderate price. A four day cruise to Mexico from Long Beach, California can cost as little as $299 on Carnival. Considering that the fare includes lodging, food, activities, and entertainment, it would be hard to match with a land-based vacation.

Luxury cruises cost much more, of course, but even they usually offer a solid value compared to other options.

Cruise lines are able to offer high levels of service at modest prices because the vast majority of crew members come from countries in Asia, Eastern Europe, and other locations where the average wage is far lower than in the U.S. These workers join a ship on a contract basis, typically committing to an eight-month stay. On the ship, they work seven days a week, sometimes for as long as 14 hours.

Staffing a U.S. flagged ship with U.S. workers subject to U.S. labor laws would cause a huge increase in prices compared to the current approach. At the moment, there is only one U.S. flagged cruise ship in operation. Norwegian Cruise Line’s Pride of America, built in 2002, sails exclusively in the Hawaiian islands.

It’s a safe bet that we won’t see an increase in U.S flagged cruise ships however much political pressure is applied. The legal, logistical, and financial challenges are insurmountable, and cruising as we know it would end.

Will Taxes on Cruise Ships Increase?

If we won’t get more cruise ships with U.S. flags, the only way to extract more revenue from cruise ships visiting or sailing from U.S. ports would be to add more taxes.

Currently, treaties with other nations mean that cruise ships flying other flags aren’t taxed by the federal government, nor are U.S. ships taxed by those nations. This is not just for cruise ships but all maritime traffic.

Individual ports in the U.S. and elsewhere, however, do charge taxes and fees on the ships that dock there. The biggest three cruise companies all have Miami headquarters where they pay employment and other taxes. The Cruise Line Industry Association (CLIA) reports that cruise lines pay nearly $2.5 billion annually in U.S. taxes and fees, more than half their global total for that category.

Could the U.S. government carve out cruise ships as a category and apply a tax or fee when they visit a U.S. port? On one hand, it seems maritime treaties would prohibit that. But, the current administration has pushed its agenda by declaring emergencies and using executive orders even when actions conflict with laws passed by Congress. Anything is possible.

What Can Cruise Ship Marketers Do?

If cruise ships were subjected to a tax based on passenger headcount, vessel capacity or some other metric, cruise prices would rise. The industry already passes port fees and taxes on to customers, and new ones would be no exception.

One way to combat an increase if U.S. taxes and fees would be to skip U.S. ports for some cruises. Clearly, it’s convenient for Americans to depart from ports in Florida, Texas, California and other states. Many can drive to the port . For others, it may be only a short flight.

But, if the tax was punitive, it could mean more ships would start their journeys in places like Ensenada, Vancouver, or any number of Caribbean ports. Cruises not visiting a U.S. port would become more competitive in price. Travelers who might normally fly from another country to start a cruise in a U.S. port would fly to the new point of origin.

At the moment, if I were a cruise line CMO, I’d be thinking about future itinerary changes that could reduce the impact of any new taxes. The question would be, “How can we continue to offer competitive prices and great value to customers inside and outside the U.S.?” The competition I’d worry about isn’t just other cruise lines – it’s theme parks, land tours, all-inclusive resorts, and other vacation options.

But, without knowing what those taxes, if any, might look like, there’s not a lot that can be done yet.

Will New Cruise Ship Taxes Really Happen?

Taxing cruise ships with foreign flags seems like a simple concept, like building an impermeable border wall. The reality, as with other simple ideas, will be a lot more complicated. It’s hard to imagine Florida, one of the most populous and politically important states, supporting something that might damage one of its key industries. And, unilateral action by the U.S. could spark retaliation from other maritime nations.

The stock market isn’t so sure. Cruise stocks tanked on Lutnick’s comments, with Carnival closing 15% lower by the next day. But, Japanese investment firm Mizuho showed less concern about any potential tax impact and termed the drop a “buying opportunity.”

For now, the cruise companies will likely focus on lobbying against new U.S. taxes on cruise ships. Cruisers will have to wait and see.