Posted on July 12, 2025
DW insight: Author notes that placing tariffs on shipbuilding inputs like steel or foreign components will hurt competitiveness of American shipbuilders.
That comparison underscores the misguided logic behind the Trump administration’s plan to attack China’s maritime industry dominance. Starting Oct. 14, the administration aims to tax imports that arrive in Chinese-owned or Chinese-built ships, as well as any vehicles arriving in foreign-built vehicle carriers. (In some cases, the fees would be forgiven if the owner takes delivery of a similar US-built vessel within three years.) For good measure, the White House also wants to hike tariffs on imports of Chinese-made shipping containers themselves, as well as ship-to-shore cranes and the chassis on which trucks move containers to and from ports.
These measures, the administration claims, will protect US jobs, help revive US shipyards and eliminate risks to national security. The money raised, it says, could be used to fund a Maritime Action Plan to “revitalize and rebuild domestic maritime industries.” But as they currently stand, the proposals would instead squeeze American exporters and manufacturers reliant on imported inputs, while doing little to strengthen the maritime industrial base. A smarter maritime policy would look outward, not inward.
The Long History of Subsidizing Shipbuilding
Concern over US shipbuilding predates Trump’s second term. In March 2024, five trade unions petitioned the Biden administration to slap fees on Chinese-built vessels entering US ports, contending that “China’s drive to dominate the global shipbuilding, maritime and logistics sector” has caused the decay of the US maritime industry. The petition triggered an investigation by the United States Trade Representative, which in Biden’s final week in office issued a lengthy report asserting that China has lavished all sorts of supports and subsidies on its maritime industries. Trump, who has loudly rejected most things Biden-related, has embraced this one.
That China’s government supports its maritime sector was hardly a secret: Successive five-year plans have emphasized shipping and shipbuilding. Subsidies to shipyards and their suppliers — and to buyers of Chinese-built vessels — are a key reason more than half the world’s new ocean shipping tonnage delivered in 2024 was built in China, up from about 5% at the turn of the 21st century.
Interestingly, though, the USTR report did not address the unions’ claim that China’s policies have hurt maritime-related companies in the United States. The obvious reason is that the claim is ridiculous: China’s vast subsidies have little to do with the woes of US shipbuilders and their suppliers, which have far more to do with decades of US government policies that encouraged those shipbuilders not to worry about foreign competition.
The Ore Guangzhou, produced by Yangzijiang Shipbuilding, as it makes its maiden voyage in August 2018
Commercial shipbuilding has been shaped by government subsidies and supports since long before China got into the game. Historically, the US itself has been a major participant: The federally owned Emergency Fleet Corporation, initially established to strengthen the US merchant marines during World War I, spent $3.5 billion for the construction of 2,318 commercial vessels in US yards, most of them built after the war ended in 1918. When that agency was put out of business in 1936, Congress took a different approach with the construction differential subsidy program, which covered more than half the cost of building vessels for US companies serving international routes in the years after World War II.
As international trade ballooned in the 1950s, European shipyards met most of the burgeoning global demand for new ships. Japan pushed into the industry in the middle of that decade, using a combination of cheap labor and leading-edge production methods to conquer the fast-growing markets for oil tankers and bulk ships to transport ore. In the 1960s, low-cost financing for purchasers helped Japan become the dominant shipbuilding country — and European countries fired back with subsidies of their own. This subsidy war prompted the Organization for Economic Co-operation and Development, a group of the world’s wealthy economies, to create a Working Party on Shipbuilding in 1966 to seek “a progressive reduction of the factors that distort normal competitive conditions in the shipbuilding industry.”
This was not easily done. While its members agreed to limit cheap loans for new ships, the OECD could not keep a lid on other types of subsidies. The largest came from South Korea. Until the 1970s, Korean shipyards had built only small vessels, mainly out of wood. The government, pushing industrialization and targeting foreign ship owners, unveiled a shipbuilding development plan in 1975 and pressured industrial conglomerates to open modern shipyards. By 1990, Korea’s ship production was eight times higher than it had been in 1975, while thousands of shipyard workers in other countries had lost their jobs.
America’s Inward-Looking Industry
While the US has at times subsidized the shipbuilding industry, it has never encouraged it to compete for foreign customers. The 1920 Jones Act, which requires cargo moving between US ports be carried in US-built and US-owned vessels (though some of the ships’ components may be imported), effectively guarantees US shipbuilders 100% of a very small market. As a result, almost all merchant vessels built in the US in the past 40 years — since the Reagan administration eliminated construction subsidies for US-flag carriers in 1981 — have been devoted to domestic trade.
This inward-looking policy makes it so that the few American yards capable of building merchant vessels face little pressure to keep costs low or productivity high. Thus any sizable ship built in the US is likely to cost several times as much as a similar ship built abroad.
Since all US shipyards combined build only a handful of cargo ships each year, it’s likewise impossible for them to capture economies of scale. Foreign shipyards often receive orders for six or seven identical oceangoing vessels, lowering the cost of each, but US shipbuilders find investment in state-of-the-art production methods uneconomic, a situation that has persisted for decades. One 2002 study by the Center for Naval Analysis concluded that US shipbuilders use “many more hours than the better foreign shipbuilders” — there is no indication that matters have improved since then. US exports of passenger and cargo ships totaled a scant $43 million in 2024; depending on its size, a single tanker built to carry liquefied natural gas could cost several times as much.
Even US-owned ship lines that offer international service have shunned vessels built in America since construction subsidies were eliminated. The boom in international trade that began in the late 1980s created enormous demand for container ships and vehicle carriers, but it largely passed US shipyards by.
US shipyards’ poor performance does not mean that they’re hopelessly inept. They successfully turn out smaller vessels such as river barges and offshore service vessels, with several domestic producers battling for orders. But when it comes to building cargo ships to handle international trade, US maritime policy has been an abject failure. Its principal goals, as set by Congress, are to protect America’s security by sustaining a strong maritime industrial base and a skilled shipbuilding workforce. Because the policy is unattuned to commercial reality, it has accomplished neither.
From an economic perspective, this failure is not of great consequence. So long as there is competition among suppliers, the US is not harmed if its imports arrive in foreign-built ships or its ports purchase foreign-made container cranes. Autarky is not a sensible strategy. On the other hand, the inability of US shipyards to compete in the international market has consequences for national defense. While submarines and aircraft carriers are built in dedicated shipyards, other Navy and Coast Guard vessels often are constructed or repaired in yards that also turn out merchant vessels. Aging facilities and shortages of experienced workers limit these shipyards’ capacity to quickly build more military ships.
Reviving US Shipbuilding
Can this sclerotic industry be revived? The mission is not impossible, but it requires policy changes that will not be welcome in Washington. Perhaps the most important is one that runs headlong into another Trump administration initiative: protection for the US steel industry.
Building a large ship requires a vast quantity of steel. American shipbuilders, however, cannot buy steel at the world market price. Every recent president has levied tariffs on at least some imported steel products. Trump’s 50% tariff on almost all steel imports enables domestic producers to raise prices as well, such that US steel users paid more than twice the global average price in March. US shipbuilders have no hope of being internationally competitive if they are forced to use the world’s most expensive steel. The same is true for manufacturers of containers, chassis and cranes.
Under the best circumstances, US shipyards are unlikely ever to build large vessels entirely with US content; even ships that qualify for domestic use under the Jones Act may have imported propellers, engines, and other components. But tariffs make those more costly in the US than in other countries, further undermining the competitiveness of American shipyards.
US President Donald Trump arrives to speak during a rally for US Steel workers in West Mifflin, Pennsylvania, on May 30
And then there’s the matter of helping buyers finance new ships — not a trivial hurdle when a new container ship can easily cost $150 million. Usually, a shipyard sells a new merchant vessel to a special-purpose company that obtains loans and other types of financing backed by a mortgage on the vessel or by expected future revenue. Governments frequently offer such loans, directly or indirectly, or guarantee commercial loans.
Thanks to these types of assistance, ship lines can obtain new vessels at much lower cost than they would otherwise have to pay. Taxpayers may be on the hook, though, if a slowdown in international trade or a surge in orders for new vessels depresses the value of the ship and the revenue it generates. If Congress is unwilling to have the US government shoulder the risk of ship loans going bad, buyers who can obtain such assistance abroad are unlikely to favor US-built ships.
Unless Congress is willing to cancel tariffs on key inputs and match other countries’ generosity when it comes to vessel financing, US shipyards are unlikely to draw foreign customers. Instead, they will remain dependent on the highly protected domestic market, just as they are today. Perhaps, given consistent levels of defense spending and strong oversight, some yards will improve their ability to build naval vessels. But even if the Trump administration requires the use of US-built ships for imports of motor vehicles or exports of liquefied natural gas, US shipyards will produce relatively small numbers of oceangoing merchant vessels. They will face little competitive pressure to match the productivity of foreign yards.
Realistically, developing a maritime industrial base capable of serving commercial customers who are not required to buy its products would require boatloads of money. A one-time expenditure for retooling outdated shipyards won’t suffice. Rebuilding that slice of the manufacturing sector would entail a long-term commitment to make US producers of merchant ships and cargo-handling equipment competitive in international markets. Subsidies, whether direct or indirect, would need to be tied to requirements that recipients fight for sales abroad and compete with foreigners for sales at home. Recipients should be pushed to develop specialized technologies, not simply to turn out goods that are generations behind those manufactured elsewhere.
Maritime nationalism has failed America badly. If the administration’s new strategy does not help build an internationally competitive industry, it’s unlikely to succeed.
