Posted on July 2, 2025
One way to save American shipping and shipbuilding is to restore the often criticized Jones Act. Another policy to revive our maritime industry is vigorous antitrust enforcement.
On April 9, President Donald Trump used his Sharpie to sign an executive order titled Maintaining Acceptable Water Pressure in Showerheads. But while Trump’s shower order was showered with headlines, the commander-in-chief signed another water-related directive of greater import during the same ceremony. Trump directed his administration to find ways to save American shipbuilding by rebuilding the nation’s nearly defunct maritime industry. This order may have been inadequate to the problem, but at least it addressed an issue of serious bipartisan concern.
America relies on ocean shipping to transport nearly 80 percent of its international trade. Yet so few large U.S. shipyards remain that they produce only about 0.04 percent of the world’s oceangoing commercial vessels. Meanwhile, nearly 99 percent of our exports and imports are carried by foreign-owned shipping companies—almost all of them operating as cartels. Some of the dangers of this dependency became evident during the pandemic, when U.S. reliance on foreign shipping cartels led to deep supply chain disruptions while fueling inflation. Since then, the United States has continued to cede maritime dominance to China, which controls over half of global shipbuilding capacity and the world’s fourth-largest ocean carrier, COSCO Shipping.
The effects of shrinking commercial shipping and shipbuilding capacity on U.S. military logistics are equally frightening. The United States no longer has sufficient sailors or ships to move military supplies. Nearly 90 percent of our military equipment travels by ship, yet a 2019 test activation of sealift ships showed a little more than a third met their mission capability, due to their age and wear. Consequently, as the Washington Monthly previously reported, “it would require more than 40 days for a brigade to unload equipment, get organized, and move to the front.”
This decline in military readiness is closely related to the deterioration of commercial shipbuilding, as the loss of domestic shipyards leaves the U.S. without the facilities and skilled workers to build and repair naval ships and support vessels efficiently.
How did we get here? For decades, a bipartisan chorus has blamed the decline of the U.S. maritime sector on a 105-year-old law, the Jones Act. Invoked in various policy debates, the legislation is purportedly an egregious example of government overregulation. Colin Grabow, a policy analyst with the libertarian Cato Institute, for example, tweeted about the Jones Act nearly 1,000 times in just a three-month span in 2020, blaming it for a slew of problems ranging from auto traffic congestion in the Northeast to high gas prices. Senator Mike Lee, the Utah Republican, has blasted the act, saying, “What could be more fitting than a dumpster fire full of manure and flames to represent the Jones Act?”
And it’s not only self-styled market libertarians who have attempted to turn the Jones Act into a symbol of industrial policy gone amok. Many who hold themselves out as “Abundance Liberals” have criticized it. Matthew Yglesias, for example, published a broadside against the act during his tenure at Vox, calling it “protectionism and exploitation at its worst.” Derek Thompson, the co-author of Abundance, has also voiced his opposition to the legislation. There is no greater example of the received wisdom of the neo-liberal consensus than its denunciations of the Jones Act.
What is supposedly so bad about it? Most of its original provisions, it turns out, have long been watered down or repealed, along with the once extensive regulation that governed the markets for shipping and shipbuilding. But a vestigial Jones Act still requires all vessels transporting cargo between two American ports to be U.S.-flagged, U.S.-built, U.S.-owned, and mostly U.S.-crewed. These regulations, critics charge, have destroyed America’s maritime sector by protecting domestic shipbuilders and carriers from foreign competition, thereby causing them to become inefficient and uncompetitive.
With the benefit of hindsight, however, it’s now easy to show that it was not excessive regulation, but excessive deregulation combined with a retreat from public investment that destroyed America’s maritime sector, leaving us dangerously exposed to mounting military and economic threats.
For decades before the outbreak of World War I, countries such as Great Britain subsidized their ship construction and operations, while the United States relied on laissez-faire. This caused U.S. shipbuilders to lose the technological edge they had enjoyed during the clipper ship era and hemorrhage market share to foreign competitors. By the turn of the century, U.S.-built vessels carried a mere eight percent of the country’s international trade. U.S.-owned shipping lines also went into steep decline.
The United States was thus left highly vulnerable once the Great War began. In 1914, Great Britain, France, and Italy diverted most of their shipping capacity to support their own war effort. The United States did not have enough tonnage to replace the withdrawn tonnage; Germany, Austria, France, and Russia’s withdrawals alone were close to seven times the tonnage of the entire international-trading U.S. fleet in 1914. This stranded U.S. shippers. The carriers that remained in the trade inflated prices significantly, increasing the cost to ship goods such as cotton by 17 times.
During the war, the U.S. government took drastic measures to increase the country’s shipbuilding capacity. For example, it requisitioned any German ships that happened to be in U.S. harbors. More significantly, Congress also passed the Shipping Act of 1916, which tasked the U.S. Shipping Board with regulating ocean shipping as a public utility and created the Emergency Fleet Corporation to create a massive shipbuilding and mobilization program.
The results were impressive. Thanks to massive direct government investment, the U.S. broke free of years of technological stagnation in shipbuilding by creating standardized, replicable designs for steel vessels that used oil instead of coal to generate more cargo space and reduce dependence on British coaling stations. The U.S. also developed the pre-fabrication techniques that allowed large cargo ships to be built in a matter of days. As a result of these government interventions, the U.S. built more than 2,300 vessels for the war effort.
After the war, lawmakers wanted to ensure that the United States would never again become so dangerously dependent on foreign shipping. Foreign governments, meanwhile, learned the same lesson from World War I and could, therefore, be counted on to regulate and subsidize their own marine sectors directly.
In that context, Congress passed the Jones Act in 1920, a 37-section law that, among other provisions, codified seamen’s rights, authorized low-cost shipping loans, and granted preferential railroad rates to cargo carried by American ships. Critically, it also tasked the Shipping Board with identifying steamship routes critical to U.S. national interests. It also tasked the Board with selling cargo vessels built during the war to private carriers to operate on those routes. In cases where private carriers were unwilling to operate vessels on those routes, the Board was authorized to run the line itself. To ensure that subsidized foreign carriers did not drive U.S.-flag carriers out of the domestic fleet, Section 27 of the law reinstated so-called cabotage restrictions. Initially put in place by the 1817 Navigation Act (and briefly waived during World War I), these required ships moving cargo between U.S. points to be U.S.-built, U.S.-flagged, U.S.-owned, and U.S.-crewed.
Combined with the rate regulation created by the Shipping Act of 1916 and later, the Merchant Marine Act of 1936, the systems-based approach of the Jones Act successfully built up the U.S. maritime sector into world dominance. The Shipping Board established, operated, and sold multiple ocean liner routes in international trade. By the end of the Second World War, the United States controlled 60 percent of the world’s tonnage and transported 63 percent of the world’s goods. It was the largest fleet in world history.
Over the years, however, critical parts of the Jones Act and other related maritime policies have been steadily chipped away or undermined. In 1946, for example, Congress passed the Merchant Ship Sales Act, which sold vessels that the United States constructed at below-market rates to allies and former enemies, significantly reducing demand at U.S. shipyards, leading to many mergers and closures. The United States also encouraged ship owners to pursue “flags of convenience,” where they could dodge U.S. labor and tax laws by registering their vessels in countries such as Panama and Liberia, shrinking the U.S. international fleet.
But the real death knell came during Ronald Reagan’s administration, when the U.S. government stopped providing subsidies for constructing and operating U.S.-flagged vessels and deregulated international ocean shipping markets. This change in policy, along with an abandonment of antitrust enforcement, led to mass consolidation and a severe reduction of shipping and shipbuilding capacity, as orders for vessels shifted to the heavily subsidized shipyards of East Asia. U.S. ocean carriers were also swallowed up by foreign competitors due to neoliberal policies, further shrinking U.S. shipping capacity.
Unlike what critics contend, it was not the vestigial cabotage restrictions of the Jones Act that shrank the U.S. merchant fleet. Rather, it’s abandoning its core provisions, along with other adjacent polices, in favor of a deregulatory, “free-market” approach. To be sure, American shipyards are less productive, have higher capital costs, and are less efficient than their foreign counterparts, but that is the result of abandoning market regulation and public investment. Much of the innovation in shipbuilding, from the transition from coal to oil to the use of welding over riveting to the growth of containerization, resulted from government design and execution.
Fully repealing the Jones Act would likely result in outsourcing any last vestiges of U.S. shipping and shipbuilding capacity rather than incentivizing competition and increasing shipping. Take, for example, India, which liberalized cabotage restrictions in 2018 to grow its shipping industry. Its Directorate General of Shipping recently noted that after liberalization, “Indian container shipping entered a phase of stagnation and decline.” In response, the Indian government recently proposed returning to more restrictive cabotage regulations to arrest the decline.
Today’s vestigial Jones Act does create fundamental inequities for a few places, most notably Puerto Rico. Because the Jones Act’s cabotage restrictions force them to rely on high-priced U.S. ships and crews to trade with the mainland, the people of Puerto Rico effectively cross-subsidize the cost of maintaining what remains of our merchant marine and domestic shipbuilding industry. But the solution to that inequity is not to repeal what remains of the Jones Act, but rather to expand it so that it once again achieves a vital national interest and shares the burden of achieving that end equitably to save American shipbuilding.
Legislation should require an increasing percentage of all U.S. imports and exports to travel on U.S.-built, U.S.-flagged vessels. These policies should be paired with smartly targeted tariffs and subsidies to counter China’s robust maritime industrial policy. Capacity at the Maritime Administration should be drastically increased to develop new, standardized ship designs powered by green technologies. Government shipyards should be created so the United States can start building at scale. Antitrust enforcement should prevent the consolidation of shipbuilding capacity, and the defense industrial base more broadly, in the hands of a few corporations.
Rebuilding America’s maritime strength will not happen by accident. It requires bold, coordinated policy that learns from history, reinvests in innovation, and recognizes that maritime strength cannot be achieved through laissez-faire. If the United States embarks on a dedicated effort to establish a suite of policies that combines public investment with regulation of the shipping and shipbuilding sectors, it would be well on the path to achieving true maritime abundance.
