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Shares of cruise line operators tumbled after US commerce secretary Howard Lutnick indicated the Trump administration was considering cracking down on the loopholes they use to pay low tax rates.
“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,” Lutnick said during Fox News’ Jesse Watters Primetime show on Wednesday evening.
Royal Caribbean Cruises, Norwegian Cruise Line and Carnival Corporation state in their annual financial statements that they believe they are exempt from US federal income tax under Section 883 of the Internal Revenue Code, which excuses foreign corporations engaged in the international operation of ships or aircraft.
The companies, which rank among the biggest cruise line operators in the world, typically have fiscal-year effective tax rates in the single digits. None of them had effective tax rates exceeding 2 per cent in any of the past five fiscal years, according to LSEG data.
“This is going to end under Donald Trump, and those taxes are going to be paid and American tax rates are going to come down,” Lutnick said during the interview.
The US-listed shares of Carnival, which operates the Cunard and Princess cruise lines, were down 5.9 per cent on Thursday. Shares in Royal Caribbean and Norwegian were down 7.6 per cent and 4.9 per cent, respectively.
Despite the sell-off, the industry has sustained strong demand as consumers continue to spend big on travel after pandemic lockdowns. Royal Caribbean’s chief executive said last month that, thanks to strong bookings and higher prices, 2025 was “shaping up to be another great year” and the company expected earnings growth of 23 per cent.
“This is probably the tenth time in the last 15 years we have seen a politician (or other DC bureaucrat) talk about changing the tax structure of the cruise industry. Each time it was presented, it didn’t get very far,” Stifel Financial analyst Steven Wieczynski said in a note on Thursday.
“Today’s weakness is a buying opportunity as we don’t believe any of this tax ‘noise’ will amount to anything material,” Wieczynski said. Although the cruise operators paid low rates of corporate income tax, they paid “massive amounts” of port taxes, he continued.
Lutnick, the billionaire businessman who was recently confirmed as secretary of commerce, was nominated by Trump, the US president, to lead his tariff and trade agenda. The former chief executive of brokerage firm Cantor Fitzgerald was also questioned by Watters if the dividends that might result from the so-called Department of Government Efficiency’s (Doge) efforts to slash government waste would trickle down to the American people.
Lutnick responded by echoing Trump’s plan to abolish the Internal Revenue Service and establish an “External Revenue System” to “let all the outsiders pay”.
