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The cruise line sector — including names like Royal Caribbean (RCL), Carnival (CCL), and Norwegian Cruise (NCLH) — traded lower Thursday after Commerce Secretary Howard Lutnick suggested these companies should begin paying US taxes.
Citi leisure and travel analyst James Hardiman joins Market Domination to dissect these comments and what they could mean for the cruise industry.
Hardiman calls this stock reaction an "overreaction" but highlights that it points out "headline risk." He notes that the cruise industry had been "exempt" from much of the "turmoil" caused by Trump administration policies like tariffs, "and now they find themselves right in the crosshairs of the president, which is exactly where you don't want to be."
Hardiman explains that cruise lines are classified as foreign shipping companies under US tax codes, exempting them from federal income taxes. While he believes this zero-tax status will change moving forward, he does not expect the cruise industry to face full federal tax rates.
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"It's not an easy fix here," Hardiman elaborates, noting that cruise ships are mostly headquartered in the US but spend significant time in international waters. He adds, "The fact of the matter is they were set up a long time ago for this specific purpose so that they wouldn't need to pay US taxes."
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This post was written by Angel Smith