For decades, the US has fallen behind in commercial and military shipbuilding while China methodically expanded its capabilities, becoming a global leader in the maritime, logistics, and shipbuilding sectors. Other major shipbuilding powers, including South Korea and Japan, have provided government support to protect their shipbuilding industries, but have been unable to keep up with China's rapid expansion. Last month, the Trump administration wrapped up the year-long investigation into China's maritime dominance, unveiling fee structures, duties, and LNG transport requirements. The final shipbuilding measures have prompted backlash from the industry and pose risks to global shipping as it stands to disrupt supply chain efficiency and sustainability. However, the rule could present opportunities for US trading partners looking to walk back some of the steep tariffs set to go into effect July 8.
China's Dominance in the Shipbuilding Industry
From producing less than 10% of shipyard output in 2000 to capturing roughly 75% of all new orders last year, China has dramatically altered its reputation from a minor player in the global shipyard industry to the most dominant player in the world. As of January 2025, China holds approximately 62% of global orders for vessels through 2033, 80% for new containerships, and 30% for LNG carriers.
China's position as the global leader in shipbuilding began in the early 2000s when it identified shipbuilding as a strategic industry following the rapid growth in containerized maritime trade. Since 2003, China has issued numerous national- and sectoral-level plans that include orders to strengthen shipbuilding capabilities, providing significant financial and regulatory support to bolster the industry, including estimates of $91 million in subsidies between 2006 and 2013. Simultaneous subsidies to China's steel industry also supported the sector's rapid growth, as steel plates make up almost a quarter of shipbuilding costs.
Concurrent with rapid commercial expansion, China's naval force (PLAN) grew exponentially, surpassing the US Navy in number of vessels. This is largely attributed to China's desire for simultaneous growth in both its commercial and defense industries, lending to a strong blend of the two sectors (military-civilian fusion). China State Shipbuilding Corporation, the world's largest shipbuilding firm by revenue and market share, is also responsible for rapidly producing advanced warships to support PLAN's modernization.
As China continues to expand its shipbuilding industry, competitors have been forced to drastically reduce production or exit the market as they were unable to compete with China's overcapacity and low-cost vessels. Today, more than 75% of China's shipyard outputs are destined for international buyers, including many US allies.
Domestic Politics
US strategies to compete with China's dominance in the maritime, logistics, and shipbuilding sectors were most recently raised in March 2024 by five major labor unions. A month later, the Office of the United States Trade Representative (USTR) determined China's dominance in these sectors pose economic security risks and severely disadvantage US industries, thus making them actionable under Section 301. In February 2025, USTR unveiled a vaguely worded proposed action that would apply exorbitant fees for Chinese-operated and built vessels—charging up to $1.5 million for Chinese-built vessels per port call, or $3.5 million if the fees were cumulative.
On April 17, USTR released a toned-down version of the actions proposed in February, beginning with a 180-day exemption period. After October 14, vessels operated, owned, or built by China will be charged fees per net tonnage, with incremental annual increases. Fees will be applied on a per-voyage basis, rather than per port call charge. The final action introduced a service fee for foreign-built vehicle carriers at $150 per car equivalent unit. Following direction from US President Donald Trump's April executive order, the final plan proposed additional duties on ship-to-shore (STS) cranes and cargo handling equipment linked to China. The final plan also includes measures to promote the transport of US goods on US vessels, requiring 1% of US liquified natural gas (LNG) to be transported on US-built, flagged, and operated vessels beginning in 2029, rising to 15% by 2047. Moreover, the plan includes a long list of exemptions to port charges—such as ships carrying for the US government and empty ships collecting US exports—to ensure vital parts of the US economy do not endure undue hardship.
Pushback from Shippers, Opportunities for Negotiators
While the finalized action presents a significantly more scaled-back version of what was proposed in February, an influx of negative feedback continues from the industry. Critics have raised the concern that the fee structure will only raise costs for US consumers and create further product shortages, adding to increased costs from global supply trade disruptions following Trump's reciprocal tariff announcement.
Others have argued the final plan does not lend itself to revitalizing the US shipbuilding industry. The US only accounted for 0.1% of global tonnage in 2023, with merely a handful of US shipyards, most of which are primarily engaged in building or repairing vessels for the navy, and two US commercial shipyards: one in Philadelphia and the other in San Diego. Furthermore, the US oil and gas industry insists it could not comply with 1% of LNG exports to be transported on US-built vessels by 2029, pointing to the dearth of shipyard capacity and skilled workers. Above all, it costs the US significantly more to build ships compared to others—a ship that would cost the US $333 million would cost a Chinese yard around $55 million.
There is interest in increasing investment in US shipbuilding, as seen through recent legislation. The House Armed Services Committee on Tuesday unveiled a $150 billion reconciliation bill toward defense priorities, with $33.7 billion allocated for shipbuilding. Further, a bipartisan group of senators and representatives this week re-introduced legislation aimed at revitalizing US shipbuilding, which would include expanding the US fleet by 250 US-flagged ships and establishing a 25% investment tax credit for shipbuilding investments, among other actions.
Given China's role in constructing a large portion of the world's commercial shipping fleets, changes to port fees are likely to have far-reaching effects on global maritime trade and supply chain logistics. Countries like Singapore—which purchased nearly 500 hulls between 2019 and 2024—will likely struggle to move away from operating Chinese-built vessels, which could lead to reduced US port calls and bilateral trade to save on costs. Moreover, China's dominance in supplying specialized vessels, including LNG tankers, would prove difficult for buyers to source production from elsewhere. Even leaders in high-value shipbuilding, such as South Korea, have outsourced production to Chinese shipyards due to capacity constraints. Port fees will likely compound existing trade declines from global tariffs on imported goods, with reports predicting containers shipped to US ports will stop this month.
For US trading partners, however, US efforts to revitalize its shipbuilding industry present an opportunity to leverage their skills to seek tariff relief. South Korea—the second largest shipbuilder after China—has expressed a desire to use its shipbuilding expertise as a negotiating chip. South Korean shipbuilders are already engaged with US shipbuilding, with Hanwha Ocean striking a $100 million deal with the Philly-based shipbuilder and HD Hyundai Heavy Industries discussing a partnership with the US' largest military shipbuilder. The US Secretary of the Navy has also recently set off for a two-day visit to South Korea and Japan to explore collaboration in commercial shipbuilding. While support from Japan and South Korea would not be enough to completely replace US reliance on Chinese-built vessels, it opens the door for other trading partners to leverage domestic strengths that would contribute to bolstering the US shipbuilding industry. For instance, while exclusions and exemptions for steel and aluminum imports were stripped in March, major steel-producing nations like India and Japan could collaborate with US steel firms via workforce development training and knowledge sharing that ultimately work to bring down costs and make building and purchasing US vessels more attractive. Moreover, with the possibility of the Trump administration launching new tariffs on STS cranes and cargo handling equipment linked to China soon, international crane-building leaders can fill the US skilled labor shortage gap and support innovation demands.
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