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By Lisa Baertlein, Liz Lee and Joe Cash BEIJING/LOS ANGELES (Reuters) -The U.S. and China on Tuesday began charging additional port fees on ocean shipping firms that move everything from holiday toys to crude oil, making the high seas a key front in the trade war between the world's two largest economies. A return to an all-out trade war appeared imminent last week, after China announced a major expansion of its rare earths export controls and President Donald Trump threatened to raise tariffs on Chinese goods to triple digits. But after the weekend, both sides sought to reassure traders and investors, highlighting cooperation between their negotiating teams and the possibility they could find a way forward. China said it had started to collect the special charges on U.S.-owned, operated, built or flagged vessels but clarified that Chinese-built ships would be exempted from the levies. In details published by state broadcaster CCTV, China spelled out specific provisions on exemptions, which also include empty ships entering Chinese shipyards for repair. Similar to the U.S. plan, the new China-imposed fees would be collected at the first port of entry on a single voyage or for the first five voyages within a year. "This tit-for-tat symmetry locks both economies into a spiral of maritime taxation that risks distorting global freight flows," Athens-based Xclusiv Shipbrokers said in a research note. Early this year, the Trump administration announced plans to levy the fees on China-linked ships to loosen the country's grip on the global maritime industry and bolster U.S. shipbuilding. An investigation during the former Biden administration concluded that China uses unfair policies and practices to dominate the global maritime, logistics and shipbuilding sectors, clearing the way for those penalties. China hit back last week, saying it would impose its own port fees on U.S.-linked vessels from the same day the U.S. fees took effect. "We are in the hectic stage of the disruption where everyone is quietly trying to improvise workarounds, with varying degrees of success," said independent dry bulk shipping analyst Ed Finley-Richardson. He said he has heard reports of U.S. shipowners with non-Chinese vessels trying to sell their cargoes to other countries while en route so the vessels can divert. Reuters was not immediately able to confirm. Analysts expect China-owned container carrier COSCO to be most affected by the U.S. fees, shouldering nearly half of that segment's expected $3.2 billion cost from those fees in 2026. Major container lines, including Maersk, Hapag-Lloyd and CMA CGM, slashed their exposure by switching China-linked ships out of their U.S. shipping lanes. Trade officials there reduced fees from initially proposed levels and exempted a broad swath of vessels after heavy pushback from the agriculture, energy and U.S. shipping industries. USTR did not immediately respond to a request for comment. China's commerce ministry on Tuesday said, "If the U.S. chooses confrontation, China will see it through to the end; if it chooses dialogue, China's door remains open." In a related move, Beijing also imposed sanctions on Tuesday against five U.S.-linked subsidiaries of South Korean shipbuilder Hanwha Ocean which it said had "assisted and supported" a U.S. probe into Chinese trade practices. Hanwha, one of the world's largest shipbuilders, owns Philly Shipyard in the U.S. and has won contracts to repair and overhaul U.S. Navy ships. Its entities also will build a U.S.-flagged LNG carrier. Hanwha said it is aware of the announcement and is closely monitoring the potential business impact. Hanwha Ocean's shares sank nearly 6%. China also launched an investigation into how the U.S. probe affected its shipping and shipbuilding industries. SHIPPING LINES SCRAMBLE FOR WORKAROUNDS A Shanghai-based trade consultant said the new fees may not cause significant upheaval. "What are we going to do? Stop shipping? Trade is already pretty disrupted with the U.S., but companies are finding a way," said the consultant, who requested anonymity because he was not authorised to speak with the media. The U.S. announced last Friday a carve-out for long-term charterers of China-operated vessels carrying U.S. ethane and LPG, deferring the port fees for them through December 10. Meanwhile, ship-tracking company Vortexa identified 45 LPG-carrying VLGCs – 11% of the total fleet – that would be subject to China's port fee. Clarksons Research said in a report that China's new port fees could affect oil tankers accounting for 15% of global capacity. Jefferies analyst Omar Nokta estimated that 13% of crude tankers and 11% of container ships in the global fleet would be affected. TRADE WAR EXPANDS TO ENVIRONMENTAL POLICY In a reprisal against China curbing exports of critical minerals, Trump on Friday threatened to slap additional 100% tariffs on goods from China and put new export controls on "any and all critical software" by November 1. Administration officials hours later warned that countries voting in favor of a plan by the U.N. International Maritime Organization to reduce planet-warming greenhouse gas emissions from ocean shipping this week could face sanctions, port bans, or punitive vessel charges. China has publicly supported the IMO plan. "The weaponisation of both trade and environmental policy signals that shipping has moved from being a neutral conduit of global commerce to a direct instrument of statecraft," Xclusiv said.   Shares in Shanghai-listed COSCO rose more than 2% in early trading on Tuesday. The company said its board had approved a plan to buy back up to 1.5 billion yuan ($210.3 million) worth of its shares within the next three months to maintain corporate value and safeguard shareholder interests. The shipping firm did not immediately respond to Reuters' queries about the port fees. ($1 = 7.1337 Chinese yuan) (Reporting by Lisa Baertlein in Los Angeles, Arathy Somasekhar and Georgina McCartney in Houston, Liz Lee, Joe Cash and Sam Li in Beijing and Heejin Kim in Seoul; Additional reporting by Samuel Shen and Brenda Goh in Shanghai and James Pomfret in Hong Kong; Editing by Stephen Coates, Kim Coghill and Lisa Shumaker)

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By Michael S. Derby (Reuters) -Federal Reserve Bank of Boston President Susan Collins reiterated Tuesday that rising risks to the job market support additional central bank interest rate cuts in what remains an uncertain economic environment. “With inflation risks somewhat more contained, but greater downside risks to employment, it seems prudent to normalize policy a bit further this year to support the labor market,” Collins said in the text of a speech to be delivered before a gathering in Boston. Even with more rate cuts, “monetary policy would remain mildly restrictive, which is appropriate for ensuring that inflation resumes its decline once tariff effects filter through the economy,” Collins said. Collins’ comments on the economy and monetary policy come after the Fed cut its overnight interest rate target range by a quarter percentage point, to between 4% and 4.25%, last month. Officials penciled in 50 more basis points’ worth of cuts into the end of the year, as the Fed seeks to help buoy the job market while still dealing with inflation that’s well above the 2% target. Collins cautioned in her remarks that the future remains unclear, noting “policy is not on a pre-set path, and I can envision scenarios where appropriate policy calls for holding rates steady later this year and into next, as we assess effects of the recent policy actions and get more information.” The official said that looking ahead, her economic outlook is “relatively benign” with continued activity gains, a small rise in unemployment joined with elevated inflation that eases next year as tariff impacts are passed through the economy. But Collins cautioned that “I do not rule out scenarios featuring higher and more persistent inflation, more adverse labor market developments, or both.” (Reporting by Michael S. Derby; Editing by Chizu Nomiyama)

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By Howard Schneider PHILADELPHIA (Reuters) -The U.S. labor market remained mired in its low-hiring, low-firing doldrums through September, though the economy "may be on a somewhat firmer trajectory than expected," Federal Reserve Chair Jerome Powell said on Tuesday, noting that policymakers will take a "meeting-by-meeting" approach to interest rate cuts as they balance job market weakness with above-target inflation. Powell, in remarks to a National Association for Business Economics conference in Philadelphia, acknowledged the economic dilemma that has split U.S. central bank officials almost evenly among those concerned most about still-high and potentially rising inflation, and those worried the labor market may be facing a fast slide downward. A newly added complication, Powell said, is that recent data on economic activity have been stronger than expected, but that hasn't yet translated into renewed hiring strength. "You do have a bit of tension between labor market data – we see very low levels of job creation – and yet people are spending," Powell said. "We are going to have to see how that plays out." The analysis, for now, will be done in the absence of official data largely suspended by the U.S. government shutdown. Powell said he felt there was adequate insight for the Fed's coming October 28-29 meeting, but that "we'll start to miss that data, particularly October data," if the shutdown persists. But for the time being, Powell said, there is a broad-enough array of public and private information to make a policy judgment, with the Bureau of Labor Statistics recently told by the Trump administration that it could release its Consumer Price Index report for September. It is now due to be published on October 24, ahead of the Fed's next policy meeting. "Based on the data that we do have, it is fair to say that the outlook for employment and inflation does not appear to have changed much since our September meeting four weeks ago," at which the Fed cut its benchmark interest rate by a quarter of a percentage point, Powell said. "Data available prior to the shutdown, however, show that growth in economic activity may be on a somewhat firmer trajectory than expected." His remarks did not change the near unanimous consensus among investors that the Fed would cut its policy rate by another quarter of a percentage point in two weeks. Powell is "saying that the economy is on solid footing, but he's also saying we have weakness … He's preparing the markets for a series of rate cuts, but not necessarily in a sequential order," said Peter Cardillo, chief market economist with Spartan Capital Securities in New York. "He'll cut by 25 basis points at the end of this month, then they'll assess." 'NO RISK-FREE' POLICY PATH Powell noted the "healthy debate" within the Fed, reflected in recent projections that showed about half of its policymakers expecting only one or no more rate cuts this year, and the rest projecting two or more. It's a sign of the tradeoffs the Fed is facing between securing its 2% inflation target and protecting the job market. "There is no risk-free path for policy as we navigate the tension between our employment and inflation goals," Powell said, noting that the policy projections issued by Fed officials every three months "should be understood as representing a range of potential outcomes whose probabilities evolve as new information informs our meeting-by-meeting approach to policymaking." Even with the September jobs report delayed, Powell, who devoted most of his formal remarks on Tuesday to a discussion of Fed balance-sheet policy, said he drew from a variety of public and private data sources for insight on the job market. "While official employment data for September are delayed, available evidence suggests that both layoffs and hiring remain low, and that both households' perceptions of job availability and firms' perceptions of hiring difficulty continue their downward trajectories," Powell said. The elevated inflation, he said, was partly due to rising goods prices that "primarily reflect tariffs rather than broader inflationary pressures." (Reporting by Howard Schneider; Editing by Paul Simao)

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