The U.S. government has intensified its investigation into China’s significant role in the global shipbuilding industry, a process that has gained traction since the Biden administration. In a bid to regain local manufacturing capabilities, proposed tariffs on Chinese-made ships entering U.S. ports could reach as high as $1.5 million. This move has gained bipartisan support and aims to counterbalance China’s overwhelming control, which accounts for 75%-80% of the global fleet.
The Rise of China’s Shipbuilding
China has emerged as a formidable player in the shipbuilding sector, surpassing South Korea in all vessel categories. According to recent data, Chinese-built container ships commanded an 81% market share in 2024. Additionally, the global fleet of bulk carriers comprises 75% of Chinese ships. In key energy markets, China’s influence is undeniable, as it leads in the liquefied petroleum gas (LPG) carrier segment with a 48% market share compared to South Korea’s 46%. Only in liquid natural gas (LNG) carriers does South Korea retain the lead with a 62% share.
Peter Sand, Chief Shipping Analyst at Xeneta, noted that the last five years have seen a marked increase in the dominance of Chinese shipbuilding. Factors such as attractive financing options, improved output quality, and competitive pricing against South Korean yards—historically recognized for constructing advanced vessels—are significant contributors to this growth.
Government Actions and Regulations
This crackdown on Chinese dominance commenced under President Biden’s administration with U.S. Trade Representative Katherine Tai spearheading an investigation into unfair trade practices involving China’s shipbuilding sector, as outlined under Section 301 of the Trade Act. A January 2025 report has substantiated claims that China’s practices, including financial support and procurement barriers, create an uneven playing field for foreign companies.
In a recent congressional address, President Trump proposed the establishment of a White House Office of Shipbuilding aimed at incentivizing domestic ship production.
To deter U.S. carriers from using Chinese-built ships, the government is suggesting hefty fees on shipments. Proposed charges include up to $1 million for Chinese-operated vessels and as high as $1.5 million for non-Chinese-owned ocean carriers utilizing Chinese-built ships at U.S. ports.
Industry Consequences
The threat of steep fines has led to a drastic increase in orders for Chinese vessels, indicating heightened concern within the U.S. government. During an upcoming House Armed Services Subcommittee hearing, the focus will likely remain on the state of U.S. shipbuilding.
Moreover, ocean carriers with over 50% of their future orders in Chinese shipyards may face additional costs of up to $1 million per vessel. By gradually increasing restrictions, the U.S. aims to ensure that at least 15% of its exports, over seven years, are shipped on U.S.-flagged carriers.
Currently, about 21% of U.S. trade imports arrive on Chinese-built vessels, indicating substantial reliance on these vessels.
Impact on Major Shipping Companies
Major players in the shipping industry are not immune to these charges. For instance, Chinese-made ships make up 24% of MSC’s fleet, and a staggering 92% of its new vessel orders are from China. The CEO of MSC, Soren Toft, warned that these proposed fees could burden the industry with costs exceeding $20 billion annually, adding $600-$800 to the shipping cost per container.
Toft outlined potential strategies to offset costs—rationalizing port calls and redirecting containers to larger ports like Los Angeles and Long Beach can mitigate some financial burdens. However, these changes could lead to logistical challenges and congestion at select ports, exacerbating already strained supply chains.
Addressing U.S. Competitiveness in Shipbuilding
Amidst these developments, bipartisan efforts are underway to improve U.S. shipbuilding capabilities. Senators and Representatives have co-sponsored the Shipbuilding and Harbor Infrastructure for Prosperity and Security (SHIPS) Act, targeting enhancements to the nation’s maritime industrial base.
Current legislation suggests reflagging 250 vessels under U.S. flags within the next decade, ensuring compliance with U.S. maritime safety standards and creating crew employment opportunities for American citizens. Additionally, tax credits could enable U.S. shipbuilding to become more competitive globally against Chinese subsidies, which average around $15 billion annually.
David Kim, CEO of Hanwha Philly Shipyard, emphasized that initiatives like the Ships for America Act will bolster the competitive edge of American-built vessels while strengthening the domestic maritime industry.
As the U.S. grapples with the realities of global shipping dynamics, it finds itself at a crossroads. With the ongoing push for reform in the shipbuilding sector, the outcome will not only impact economic policies but also national security interests. The focus remains clear: ensuring that the U.S. retains its maritime capabilities and reduces dependence on foreign shipbuilders.
