U.S. government pushback against China’s growing dominance in the shipbuilding industry that began under President Joe Biden is being escalated by the Trump administration as part of the president’s widening global economic and trade war, with the world’s largest ocean freight companies facing the threat of fines of up to $1.5 million for Chinese-made container ships that call on U.S. ports.
In recent years, China’s presence in the shipbuilding sector has rapidly grown, with China overtaking former leader South Korea in all vessel building sectors. In 2024, Chinese-built container vessels held 81% market share, according to Veson Nautical data. In the bulk carrier fleet, Chinese ships represented 75% of the global fleet. In key energy markets, China has been increasing its presence as well. China now has a 48% market share in the liquified petroleum gas carrier market, edging out South Korea’s 46%. Only in the LNG carrier market did South Korea retain its lead, holding a 62% share versus China’s 38% share.
While China has been increasing its shipbuilding for decades, “the dominance of Chinese shipbuilding has been further elevated during the last five years,” said Peter Sand, chief shipping analyst at Xeneta. Attractive financing from Chinese banks and leasing institutions, improved quality of the output, and competitive pricing against the South Korean yards which have dominated the building of advanced and large ships, are all factors, he said.
Under Biden, U.S. Trade Representative Katherine Tai initiated an unfair trade investigation of China’s shipbuilding under Section 301 of the 1974 Trade Act. A report released in January 2025 concluded that China’s financial support, barriers for foreign firms, intellectual property theft, procurement policies, and forced technology transfers have given its shipbuilding and maritime industry an unfair advantage.
In his speech to Congress last week, Donald Trump announced that he would create a new office of shipbuilding in the White House that would offer special tax incentives to bring more shipbuilding back to the U.S.
To penalize ocean carriers using Chinese-made vessels to move trade, the U.S. government has proposed steep levies on Chinese-made ships arriving at U.S. ports. For Chinese-owned operators (such as COSCO), a service fee of up to $1 million could be charged on each vessel. For non-Chinese owned ocean carriers with fleets containing Chinese-built vessels, the service fee would be up to $1.5 million for each U.S. port of call.
The massive jump in Chinese ship orders reflects the concerns from the U.S. government.
On Tuesday, the House Armed Services Subcommittee on Seapower and Projection Forces is holding a hearing on U.S. shipbuilding, with a public hearing by the USTR scheduled for March 24.
In addition to the service fee charged for Chinese-made vessels making port calls, the USTR report from January proposed that ocean carriers with 50% or more of their orders in Chinese shipyards, or vessels expected over the next 24 months, be charged up to $1 million per vessel per entrance to a U.S. port. The fees could be refunded annually in an amount up to $1 million per entry into a U.S. port of a U.S.-built vessel.
The proposals to limit China’s shipbuilding dominance would also impose restrictions on U.S. exports, starting at 1% of all U.S. products exported by vessel needing to be exported on U.S.-flagged vessels of U.S. operators. Over the course of seven years, the restrictions will be gradually increased to at least 15% of all U.S. goods needing to be exported on U.S.-flagged vessels of U.S. operators, of which 5% must also be U.S.-built.
This photo taken on January 16, 2025 shows ships under construction in a yard of a shipbuilding company in Taicang, east China’s Jiangsu province.
Str | Afp | Getty Images
“It remains to be seen how the international shipping community will deal with the hurricane of ideological hurdles set up by the Trump administration aimed at limiting the footprint and dominance of China,” said Sand.
According to VesselBot, 21% of all U.S. trade imported into the U.S. in 2024 arrived on Chinese-built vessels.
The global fleets of major ocean carriers are at risk of being subjected to the steep financial penalties.
Chinese-made vessels comprise 24% of the global fleet for MSC, the largest ocean carrier in the world, while its new vessel order book shows 92% of its future vessels will be made in China, according to data compiled by Lloyd’s List.
“If the charges come out in the present form, it’s going to have significant consequences,” Soren Toft, CEO of MSC, told CNBC at the recent TPM Conference in Long Beach, California.
Toft, who is chairman of the World Shipping Council, said the proposed charges would reach roughly $20 billion-plus for the industry. That would translate into an additional $600-$800 per container. “So very, very significant,” Toft said.
“Either we will have to revise our network and withdraw coverage, or we will have to add that cost on top, and ultimately the consumer will have to pay,” Toft said.
To mitigate the costs, the ocean carrier would need to pair down port calls and divert containers to major ports. Toft said one port that could be eliminated, with containers diverted to alternative ports such as Los Angeles and Long Beach, would be the Port of Oakland.
“I think a lot of the marginal ports, the peripheral ports will be at risk,” Toft said. “You can add a number of more ships [to move the containers], but if you have no capacity at those ports, you will have choke points. U.S. ports are not very competitive when it comes to the cost of moving things.”
These changes would have an impact on port throughput because the truck and rail chassis needed to move the containers will not be at the right ports. In addition to the misallocation of equipment, Toft said this switch in port strategy could create congestion at some ports, which would impact the supply chain.
The changes would come in a U.S. ports market that is already operating with widespread issues.
“U.S. ports, unfortunately, are not seeing their full potential, because the ports are not operating 24/7. If you look at the realities, probably the U.S. ports are effectively operating 60% of the work week,” Toft said. “So there’s a massive potential here.”
MSC is not alone in facing the shipbuilding charges.
Maersk, the No. 2 ocean carrier, has a current fleet that is 20% Chinese-made, with 79% of its orderbook from China. CMA CGM’s fleet is 41% Chinese, with 54% Chinese-made vessels on order, while Hapag Lloyd’s global fleet is 21% Chinese-made, with 89% of future orders to be made in China.
U.S. shipbuilding has not been competitive
Because of China’s dominance in shipbuilding, there has been a bipartisan push on Capitol Hill to incentivize a sluggish U.S. market.
Senator Mark Kelly (D-AZ), Senator Todd Young (R-IN), Representative John Garamendi (D-CA-8), and Representative Trent Kelly (R-MS-1) introduced the Shipbuilding and Harbor Infrastructure for Prosperity and Security (SHIPS) for America Act, to close the gap with international builders through a series of programs.
Kelly told CNBC that China operates 5,500 ocean-going vessels worldwide while the U.S. has under 100 vessels.
To provide cushion for the buildout of new vessel infrastructure, Kelly said that over the course of ten years, the U.S. would reflag 250 vessels to U.S. flags. This reflagging would mean the ship is crewed by American captains, insured by the U.S., and adheres to U.S. maritime safety standards.
According to the Hudson Institute, approximately 70% of Chinese-owned vessels are registered in China. Among the rest of the top ten vessel-owning countries, only 27% of fleets are traversing the water under their national flag vessels. A little over 43% of the U.S. fleet is flagged by the U.S.
Another lever to encourage U.S. shipbuilding would be tax credits. According to Kelly, China’s subsidies and state financing in the shipbuilding sector average around $15 billion a year. Subsidies in the country’s steel industry also help keep costs down. Around 60% of the cost of the construction of a container ship is steel.
“The loss of U.S. shipbuilding and shipping has resulted in the reduction in the number of shipyards for not just commercial ships but also warships and military sealift ships for the U.S. Navy,” said Kelly, who served in the Navy for 25 years. “The U.S. military aircraft carrier capacity lacks 90-100 ocean-going tankers to fuel warships in a wartime emergency. This is a matter of national security.”
Arnav Rao, transportation policy analyst at the Open Markets Institute and former staffer for Senator Jack Reed (D-Rhode Island), blasted the Biden Administration for rejecting the Nippon Steel bid for U.S. Steel on national security grounds saying, “The result is the United States robbed itself of the ability to modernize steel-making that could have also supported new U.S. shipbuilding — in support of U.S. national security.”
In February, President Trump said he would only support a “minority stake” for the Japanese company.
Sand tells CNBC that the price tag of a Chinese-made vessel is estimated to be around $295 million, depending on the size and type of vessel. A U.S.-made vessel can be approximately two to four times more expensive. Meanwhile, back orders of U.S. naval ships could result in wait times of many years for new container vessels.
The future of the U.S. cargo vessel market
The U.S. maritime fleet is divided into three segments: the domestic fleet (known as the Jones Act fleet), the international fleet, and the Military Sealift Command (MSC). According to the U.S. Department of Transportation, the total U.S. flag merchant fleet is 185. UNCTAD data shows that 80 merchant vessels currently fly under the U.S. flag for international commerce.
Ships and barges that carry cargo and passengers between U.S. ports, and U.S. island territories, are part of the domestic fleet. These vessels must be made and operated in the U.S., a requirement in the Jones Act that was enacted in 1920. The U.S.-flag international fleet consists of vessels that carry passengers or cargo between the U.S. and foreign countries. These vessels do not need to be built in the U.S., but they must be owned and crewed by U.S. citizens. The MSC fleet is a part of the Department of Defense, primarily used to resupply Navy combatant ships at sea, and including oil tankers and containerships.
The leading U.S. commercial shipyard constructing vessels for operation in the domestic Jones Act trade lanes is the Philly Shipyard in Pennsylvania, which supplies around 50% of the largest U.S. commercial vessels, including tankers and container ships. The shipyard also constructs training vessels for the U.S. Maritime Administration (MARAD). Philly Shipyard was acquired in June 2024 by South Korea’s Hanwha Systems and Hanwha Ocean.
Kelly, who recently visited the shipyard, said it is a matter of national security for LNG and tanker vessels to be made in the U.S. and transport U.S. energy.
David Kim, CEO of the Hanwha Philly Shipyard, said the Ships for America Act will strengthen the country’s maritime industrial base while making American-built ships competitive in the global shipping industry. “We are working to expand the capacity of our shipyard and welcome initiatives such as the Ships for America Act to boost the industry,” said Kim.
In 2022, Matson Navigation Company, a leading U.S. Jones Act carrier in the Pacific, signed with Philly Shipyard to build three new 3,600 TEU (twenty-foot equivalent unit) Aloha Class containerships for an aggregate price of approximately $1 billion (or $330 million each). Chinese vessels of the same size are estimated to cost $60 million.
The cutting of steel plates for the vessels began in September 2024, with the first vessel in this contract expected to be delivered in the fourth quarter of 2026, and subsequent deliveries in 2027. Four newly built Jones Act containerships were built for Matson between 2003 and 2006.
Not only are U.S. vessels more expensive to make, but operating a U.S. vessel costs around twice as much as South Korean or Chinese vessels with a crew from the Philippines, with costs ranging from $5,000 per day for a smaller vessel to $10,000 per day for a largest vessel.
Main operational costs include manning, insurance, stores & spares, lubricants, repairs & maintenance and dry docking, and management & administration. Sand said the biggest expense is salaries of the crew. “Keeping operational costs as low as possible is key to the profitability of carriers when the markets are low,” he added.
Operational costs do not include fuel, finance cost, canal fees, or terminal handling charges.
In addition to Philadelphia, Kelly said there are existing shipyards with potential for shipbuilding in Mississippi, Alabama, Louisiana and Texas that could be scaled up using incentives in the SHIPS for America Act. The bill itself is agnostic about where or how to build specific infrastructure.
“The SHIPS Act would reduce the cost of constructing a U.S.-built cargo vessel capable of serving in international commerce by offering tax credits, grants and other incentives to make capital investment comparable with the cost of investments in allied countries,” Kelly said. “We are not trying to out-build China. We are looking to close that gap.”
