Posted on February 6, 2025
Competition with China has compelled policymakers to reexamine the state of U.S. shipbuilding. In the American way of shipbuilding, the best way to expand shipyards’ industrial base and workforce is to place orders for new ships. While appropriations for new warships always fluctuate between peacetime and war, the cyclical history of U.S. shipbuilding may suggest a solution to a 21st-century U.S. shipbuilding problem—a solution that necessitates the continued construction of existing classes of ships.
U.S. policy, legislation, and shipbuilding statistics suggest a U.S. shipbuilding cycle that explains its repeated rise and fall in the 19th and 20th centuries and can inform its recovery in the 21st century. Modern U.S. shipbuilding pairs private entrepreneurship with government investment to meet the demands of the commercial market. It sustains the industry during economic downturns with government and military orders, reinvigorating the industry with legislation and investment to expand, adapt, and modernize to meet new market needs. But unlike during previous downturns, U.S. shipbuilding of large commercial oceangoing vessels has declined to a fraction of global commercial competitors’ since the end of the 20th century. This affects the industry’s long-term safety net, naval shipbuilding.
The U.S. Navy’s goal of 381 ships in its 2024 30-year shipbuilding plan requires two things: $34 billion to $36 billion over the next 30 years, and shipyards capable of building the vessels. It is bold to assume that the needed shipyards and workforce will materialize to build whatever Congress appropriates. Before the Reagan administration’s plan for a 600-ship Navy in the 1980s to counter the expansion and modernization of the Soviets’ Red Fleet, U.S. shipyards were building 5 percent of oceangoing commercial ships in the 1970s. By 2016, U.S. shipbuilding had contracted by more than 85 percent since the 1950s, and the number of U.S. shipyards large enough to build oceangoing vessels had dropped by more than 80 percent. By 2023, the U.S. market share had dropped to 0.13 percent, with China, Japan, and South Korea responsible for more than 90 percent of global commercial shipbuilding.
Although the Fiscal Year (FY) 2025 budget requested an increase in shipbuilding to $32.4 billion, the U.S. Navy requested only six new ships, instead of the seven ships projected for FY 2025 in the FY 2024 budget submission. These requests remain below the 10 to 11 new ships needed each year over the next 35 years to field the 381 manned ships outlined in the FY 2025 request. Moreover, the shortfall in orders for more ships reduces private shipyards’ incentive to invest in their industrial base and workforce to compete for work, and the government is left to appropriate additional funds to maintain or enhance facilities and workforces that are not actually building or repairing vessels.
The Five Eras of U.S. Peacetime Shipbuilding
Since the late 19th century, there have been five distinct periods of growth in U.S. shipbuilding not associated with wartime mobilization. The construction of the “New Navy” from the 1880s to the start of the 1898 Spanish-American War; the construction of the “Big Navy” following the Spanish-American War until the start of World War I in 1914; the revitalization of the Navy following the post–World War I naval arms treaties and the Great Depression, leading up to the naval rearmament of the Two Ocean Navy Act of 1938; the modernization of the Navy’s surplus World War II fleet in the 1960s; and the modernization of the 1960s Cold War fleet to upgrade and build enough ships for the 600-ship navy of the 1980s. Each period had four effectors in common. An existential threat that provided an argument for building ships; a shipbuilding strategy that justified how many ships are required; support in the form of legislation and funding; and an entrepreneurial private sector that built efficient infrastructure and developed skilled labor.
The construction of the New Navy from 1883 to 1898 resulted from growing tensions between the United States and Spain over the status of Cuba, and the threat Spain’s navy posed by operating in the Western Hemisphere. The Ten Years War in 1868, and later the onset of the Cuban War of Independence, compelled the United States to repair and restore some of its ocean-going monitors and construct modern battleships and cruisers to compete with Spain’s more modern fleet.1 The appropriation of funds in 1883 for the U.S. Navy’s first modern steel-hull steam warships, the USS Atlanta, Boston, Chicago, and Dolphin, were authorized and awarded to Philadelphia’s largest shipbuilder, John Roach & Sons, which was conveniently located close to Pennsylvania’s iron mines and forges.
After a surge of construction during World War II, the U.S. Navy had a large, relatively new fleet of warships.
The experience gained in appropriating, designing, and building these warships prepared the Navy and shipyards for the next round of orders in the 1890s. Brazil’s acquisition of the modern battleship Riachuelo in 1893 compelled the Navy and Congress to request and appropriate newer and more modern ships to prevent the Navy from falling behind technologically.2 The creation of a new specialized workforce skilled in constructing all-steel steam-powered ships in close proximity to the Pennsylvania iron foundries enabled Congress to authorize the building of modern armored cruisers and battleships, which placed it fifth among all navies in the 1890s.3
The resurgence of U.S. naval shipbuilding starting in the 1880s, the Navy’s victory over Spain in the Spanish-American War, and congressional support of President Theodore Roosevelt’s advocacy for a large and modern Navy resulted in the construction of modern battleships, destroyers, and submarines. By the time World War I was about to start, the U.S Navy was the third largest in the world, behind Great Britain and Germany. The demand for more government and private shipyards to construct and repair a growing fleet resulted in new shipyards in New Jersey, New York, Massachusetts, and California.
During the interwar years, the Great Depression, a renewal of U.S. isolationism, and optimistic hopes that international agreements would prevent a naval arms race resulted in the U.S. government not placing new orders for ships already authorized. Legislation included in the National Industrial Recovery Act (NIRA) of 1933 provided the necessary authorization to appropriate funds to shipyards, directly contributing to constructing two aircraft carriers, four light cruisers, 20 destroyers, and four submarines. The subsequent Vinson-Trammel Act of 1934 authorized the Navy to build up to treaty allowances and decommission older vessels to allow for the building of newer ones.4 As a result, the Navy awarded orders for vessels spread across no fewer than seven Navy yards and seven private yards between 1932 and 1937, providing a base for wartime production that only necessitated the creation of two new shipyards, which accommodated an increase in destroyer production.
After World War II, the United States canceled shipbuilding orders and mothballed a large, generally new fleet of warships. With a surplus of ships and a shipbuilding industry with the capacity for wartime production, the U.S. government was not interested in building more ships or investing in improved shipbuilding techniques. U.S. shipyards did find some relief when the government intervened with the reactivation and repair of the Reserve Fleet in support of the Korean War. Later, work was transferred to private shipyards following the closing of three Navy shipyards. The Navy then devised a plan to build nearly 250 new ships between 1963 and 1967, concentrating the work at a handful of private yards. Then, in 1969, the amendment of the Merchant Marine Act of 1936 included new classes of tankers and dry bulk carriers being built overseas. Unfortunately, the decline in U.S. shipbuilders resumed with Secretary of Defense Robert McNamara’s application of Total Package Procurement (TPP) to naval orders in the mid-1960s, which failed to reduce construction costs and limited contracts to fewer shipyards.
The end of TTP in the 1970s, and the Reagan administration’s 600-ship Navy strategy in the 1980s, partially reversed the loss of work for shipyards. Fifty-four Oliver Hazard Perry–class frigates were built between 1975 and 1989 at three shipyards: Bath Iron Works, Todd Pacific Shipyards San Pedro, and Todd Pacific Shipyards Seattle. Twenty-seven Ticonderoga-class cruisers were built between 1980 and 1994, and 73 Arleigh Burke-class destroyers have been built since 1988 at Bath Iron Works and Ingalls. Moreover, none of the planned ships were cancelled, and ships with sufficient service lives were reactivated or modernized, rather than decommissioned and scrapped, to increase the number of battle-force-capable ships.5
The Next Naval Peacetime Rearmament
The rearmament the U.S. Navy envisions for this era of great power competition has the requisite existential threat presented by China, focuses on a shipbuilding strategy for 381 ships, and finds legislative support from the FY 2025 funding.6 In addition, the 2024 National Defense Industrial Strategy (NDIS) and 2024 NDIS Implementation Plan for FY 2025 describe the U.S. government’s investment to regenerate atrophied shipbuilding facilities and workforce levels. All that remains is the entrepreneurship of the private shipyards to construct the ships.
Despite the poor state of commercial U.S. shipbuilding, military shipyards are poised to expand production in a new resurgence. After the collapse of the Soviet Union and U.S. military drawdown and base closures in the 1990s, smaller and more efficient shipyards such as Ingalls Shipbuilding, Bath Iron Works, and National Steel and Shipbuilding Company (NASSCO) remained and were awarded important construction orders in the lean post–Cold War 1990s. In addition, the Freedom- and Independence-variant littoral combat ships resulted in the creation of facilities and shipyard jobs in two new post–Cold War shipyards at Marinette Marine and Austal USA. Moreover, NASSCO, the last large vessel shipbuilder on the U.S. Pacific Coast—which has built 74 large naval auxiliary vessels for the U.S. Navy since 1962—has expanded from San Diego to other Navy fleet concentration areas. It acquired shipyards in Norfolk, Virginia; Bremerton, Washington; and Mayport, Florida. NASSCO’s activity follows the cyclical trend of U.S. shipbuilders in economic downturns.
Meanwhile, shipbuilding is witnessing a revolution as significant as was the transition from wooden ships to steel-hull steam-powered ships, or to welding from riveting. The introduction of autonomous and semi-autonomous systems to naval ships provides the Navy and U.S. shipyards, particularly the more numerous and active yards constructing medium and small vessels, with the opportunity to increase ship production by building smaller vessels that require no crews, or very small ones. These ships are a fraction of the construction and operating cost of a larger, fully crewed vessel such as the Arleigh Burke–class destroyer.
The growing need for ships in response to competition with China, and the increasing interest by local, state, and federal governments to sustain and rejuvenate the industry, mean there should be sufficient resources to increase U.S. shipbuilding.
