Have you ever seen a US-flagged cruise ship? Chances are, you probably have not – but this could all be changing soon.
On February 19, 2025, US Commerce Secretary Howard Lutnick suggested during a Fox News interview that President Donald Trump plans to abolish the Internal Revenue Service (IRS) – and instead make outsiders pay, including even calling out cruise lines.
“You ever see a cruise ship with an American flag on the back?” Lutnick pointed out.
Common flag etiquette is to fly the flag of every country a cruise ship visits – but most do not fly the American flag since it comes with a high cost.
Typically, a ship’s “flag of convenience” – which is where the ship is registered – is in a country with better laws and lower taxes than the US.
Also, crew members on US-flagged vessels have to pay US federal taxes – plus, there are strict requirements stating that the majority of the staff must be citizens.
Lutnick added, “None of them pay taxes … every supertanker. None pay taxes … all foreign alcohol. No taxes. This is going to end under Donald Trump.”
Worth Reading: What is the Passenger Vessel Services Act and How Does it Impact Cruises?
In the wake of this comment, cruise stocks took quite the hit as the market opened Thursday.
Carnival Cruise Line’s stocks took the smallest hit throughout the day, dropping only about 5%. Royal Caribbean dropped almost 9.3% early on, but ended the day down 7%.
Norwegian Cruise Line and Viking Cruises were also both affected, both dropping as much as 7%.
Most experts are saying there has been a massive overreaction to the comment made by Lutnick – so much so they would advise it as a good buying opportunity for investors.
The cruise industry has been booming since the end of the COVID-19 pandemic – as the lifting of mass quarantines brought an increase in the demand for travel.
Stocks have been on the rise since 2022 – Royal Caribbean’s up almost 400% – and Carnival Cruise Line’s up 205%.
These cruise lines have headquarters in Florida – but are also incorporated in other countries such as Liberia and Panama – allowing them to be exempt from paying taxes on US-sourced income.
President Trump wants to change this, but so far, no further plans have been shared publicly. There are many options for cruise lines moving forward to remain unaffected by the suggested tax increase.
How to Avoid Cruise Taxes
By now, you may be wondering if your cruises are about to cost more. I have some good news – there is a very good chance this won’t happen.
A team of analysts led by leisure industry expert Steven Wieczynski shared some reassuring information – citing that it is about the 10th time in the past 15 years a politician talked about changing the tax structure in the cruise industry.
They also noted that every time it has been talked about, it has never made it very far.
Most business conducted on cruise ships happens in international waters, making it nearly impossible for any country to truly target the cruise lines directly.
When new taxes are imposed by countries, the cost usually falls on the passenger.
So that means that any passenger on a US-flagged – including US citizens – would actually have to pay more for their cruise fare. Talk about a lose-lose situation!
Currently, the only cruise ship that is US-flagged and registered in the country is Pride of America, operated by Norwegian Cruise Line. There are also various smaller lines that cater to lakes and rivers across the US.
Read Also: Mexico Decides to Delay New Cruise Tax Fee
Cruise lines actually pay a significant amount of taxes and fees in the US – nearly $2.5 billion annually, which is about 65% of the total taxes that cruise lines pay worldwide.
The question remains on why the US government would make a comment that could drive the industry away – as cruise lines can move their headquarters and take jobs elsewhere if need be.
If it became required for cruise lines to have US-flagged ships or pay taxes based on their headquarters locations, then there might be some pricing changes. Until then, it is smooth sailing.
