If Donald Trump hopes that looming port penalties on Chinese-built and/or owned ships will have the desired effect of reviving America’s ailing shipyards, he is certain to be disappointed.
“We’re way, way behind. We used to build a ship a day – now we hardly build one a year,” is Trump’s lament. “But we have the capacity to do it.”
There are three errors here. America never built a ship a day. Although it builds a lot more than one a year, these are mainly naval vessels. And the capacity is definitely not there – China’s 300 yards have the capacity to build a mind-blowing 232 times more tonnage than American ones.
Trump’s grand plan faces a “Herculean task”, according to one commentator.
First, the vast majority of shipping companies will continue to go to China for their new ships except for the most specialised vessels like LNG tankers. In April alone, just one shipbuilder, China Merchant, booked a US$1.4 billion job lot of nine roll on-roll off ferries for a European shipping group, while Mediterranean Shipping, the world’s largest container line, ordered six giant box ships from Hengli Heavy.
China’s dominance in newbuilds is actually growing. In 2024, its yards booked 70 per cent of global commercial orders, according to maritime consultancy Clarksons. Plainly put, the United States simply missed the boat in the shipbuilding boom over the past 20 years when the global fleet grew by more than 150 per cent. That’s why there are 80 US-flagged ships steaming the world’s shipping lanes compared with China’s 5,500.
Nobody’s against more US-built ships but, as the fine print of Trump’s project shows, America will need a lot of help, and it will take time and money.
Second, Chinese yards build new vessels much cheaper and faster than do US shipyards, even the ones specialising in navy ships. “The Departments of Defence and Homeland Security have long histories of struggling to remain on-time and on-budget during major vessel acquisition programs”, says the Council on Foreign Relations in a report on Trump’s hopes.
Of course, China’s cost advantage is directly attributable to floods of taxpayers’ money. Between 2010 and 2018, Beijing pumped the equivalent of $132 billion in direct subsidies and state-backed financing, according to a study by the Centre for Strategic and International Studies.
And finally, flip-flops by the office of the US Trade Representative over port-side penalties and tariffs will greatly reduce the hoped-for revenues to pay for new ships. The USTR’s 42-page revision in mid-April of its ill-considered original proposals have watered them right down in the face of a global and domestic chorus of complaints. Instead of 80 per cent of container ships, originally the hardest-hit, being liable for port-side penalties, it’s down to just seven per cent, according to Clarksons. And across all shipping including container ships, it’s down from 43 per cent to nine per cent.
Many don’t see even these revised numbers working. “It’s a step in the wrong direction as it will raise prices for consumers, weaken US trade and do little to revitalise the US maritime industry,” warned Joe Kramek, president and chief executive of Washington-based World Shipping Council.
And pending public hearings, the numbers may look different again when they are fully operational in three-and-a-half years’ time, when Trump is due to leave the White House.
Nevertheless, the USTR sees its proposals as a triumph, citing the “widespread praise” it received for “these responsive actions [to resurrect American shipbuilding and remedy the unreasonable way that China is trying “to dominate the maritime, logistics and shipbuilding sectors.”
Historically, culprits abound for America’s woeful state of shipbuilding. The 1920 Jones Act required an all-American shipping industry – exclusively US-built and crewed ships carrying US cargo in US waters that led to high, monopolistic freight rates and newbuild costs. Turf wars and red tape are others, especially in naval vessels. The Department of Defence “is unused and disinclined to coordinating the US Navy’s $32 billion budget for military shipbuilding”, notes the Council on Foreign Relations, citing billions in cost overruns, years-late deliveries, indifferent quality and performance. By way of example, the US Navy’s current frigate replacement program is running three years behind delivery.
Trump’s ship-building project actually emerged during the Biden administration in the form of the bipartisan SHIPS for America Act and has been appropriated by Trump. The stated goal is to create a 250-strong US-flagged, domestically built and American-crewed international commercial fleet by 2035. Nobody’s against more US-built ships but, as the fine print of Trump’s project shows, America will need a lot of help, and it will take time and money.
In the interim, the US Coast Guard is looking to Finland and other countries for the construction of a $2.85 billion fleet of icebreakers.
