Cruise Stocks Plummet After Tax Comments from Commerce Secretary

MIAMI, Fla. — Shares of major cruise lines fell sharply on Thursday following comments from Commerce Secretary Howard Lutnick regarding potential tax changes under the Trump administration.

During a segment on Fox News on Wednesday, Lutnick questioned the tax contributions of cruise companies, stating, “You ever see a cruise ship with an American flag on the back? None of them pay taxes … every supertanker. None pay taxes … all foreign alcohol. No taxes. This is going to end under Donald Trump,” he declared.

The stock prices reflected the reaction, with shares of Carnival Corporation dropping 5.9%, Royal Caribbean International falling by 7.6%, Norwegian Cruise Line decreasing by 4.9%, and other cruise stocks weakening by 3% on average.

Analysts at Stifel Financial viewed the market’s reaction as a significant overreaction. They advised investors to consider purchasing shares while prices are lower. “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,” said Steven Wieczynski, who led the analysts’ report. “Each time it was presented, it didn’t get very far.”

The report highlighted that from a taxation perspective, the cruise industry is categorized under the cargo sector by the Internal Revenue Service. “That means 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 Stifel report added.

Should tax structures change, the cruise industry might respond by relocating their corporate headquarters overseas, potentially decreasing job retention within the U.S. The analysts pointed out that with more than 90% of cruise operations taking place in international waters, enforcing any U.S. tax regulations would be exceedingly difficult.

Stifel also reiterated buy recommendations on several cruise stocks, including Carnival, Royal Caribbean, Norwegian, Viking, and others.

In defense of the industry’s tax contributions, the Cruise Lines International Association issued a statement clarifying that cruise lines pay substantial taxes and fees in the U.S., totaling nearly $2.5 billion. This amount accounts for approximately 65% of the total taxes cruise lines pay worldwide, despite a minor percentage of operations occurring in U.S. waters. The Association emphasized that foreign flagged ships visiting the U.S. are treated similarly to U.S. flagged ships visiting foreign ports, ensuring consistent reciprocal taxation treatment among international shipping.