The U.S. government is intensifying efforts to combat China’s dominance in shipbuilding with proposed financial levies and policies aimed at bolstering domestic production. Initiatives, including the establishment of a White House office for shipbuilding and the bipartisan SHIPS for America Act, seek to enhance U.S. maritime capabilities. The implications of these policies could significantly affect operational costs and logistics across trade routes.

The U.S. government is intensifying its investigation into China’s significant role in the shipbuilding industry, where it dominates 75% to 80% of global fleets, a focus initiated during the Biden administration. Proposed steep levies of up to $1.5 million on Chinese-made ships at U.S. ports aim to incentivize domestic shipbuilding, garnering bipartisan support. This effort encompasses a broader economic strategy under President Trump to curtail China’s maritime dominance.

China’s shipbuilding capabilities have rapidly increased, overtaking South Korea to command an 81% market share for container vessels in 2024. Furthermore, Chinese ships constituted 75% of the bulk carrier fleet and gained a 48% market share in LPG carriers. Peter Sand, chief shipping analyst at Xeneta, attributed these gains to favorable financing, enhanced quality, and competitive pricing against South Korean yards.

Under Biden’s administration, U.S. Trade Representative Katherine Tai launched an investigation into unfair trade practices in China’s shipbuilding sector. A report revealed how China’s financial aid, restrictive foreign policies, and technology appropriation provide them an unfair advantage, prompting new policies during Trump’s term aimed at enhancing U.S. shipbuilding.

President Trump recently pledged to create a White House office dedicated to shipbuilding, promising tax incentives to bolster domestic production and reduce reliance on Chinese-built ships. Additionally, service fees of up to $1 million for Chinese operators and $1.5 million for vessels of non-Chinese owned fleets entering U.S. ports have been proposed to discourage their use.

The forthcoming House Armed Services Subcommittee hearing will further explore U.S. shipbuilding policies. Moreover, proposals indicate a phased increase of U.S. exports needing to be onboard U.S.-flagged vessels, starting from 1% to 15% within seven years, with stringent conditions on vessel origins and constructions.

Concerns are mounting regarding the potential penalties on global ocean carriers, especially as Chinese-made vessels make up 24% of MSC’s fleet. CEO Soren Toft warned that the proposed fees could reach $20 billion annually, leading to increased costs per container and potential operational adjustments including reduced port calls in favor of major ports like Los Angeles.

As U.S. ports grapple with inefficiencies in operations, including limited operational hours, the proposed changes threaten to exacerbate logistical challenges. Furthermore, strategic adjustments made by large carriers may lead to congestion and delays during ongoing supply chain disruptions.

Despite these measures, U.S. shipbuilding remains uncompetitive. Senators Mark Kelly and Todd Young, along with Representatives like John Garamendi, have introduced the SHIPS for America Act to enhance the domestic shipbuilding industry over the next decade. This initiative aims to reflag 250 vessels and incentivize new construction to meet national security needs, as U.S. naval capacity continues to diminish in tandem with shipping output.

While the cost distortion caused by Chinese production remains a challenge—estimated costing between $295 million for a Chinese vessel compared to four times for U.S.-made ships—Senator Kelly emphasized the security implications of U.S. naval readiness. Furthermore, logistical and operational expenses continue to favor foreign-built vessels, prompting diverse strategies, including the exploration of alternate shipyard capacities across various U.S. states for shipbuilding scalability.

The SHIPS for America Act aims to bridge the cost gap between U.S. and foreign shipbuilding through tax credits and grants, keeping the focus on equity in international commerce, rather than direct competition. As the U.S. navigates these complex economic waters, the urgency of supporting maritime infrastructure and local shipbuilding capabilities has never been more pronounced.

The United States is taking significant steps to confront China’s dominance in shipbuilding through proposed levies and the establishment of new policies aimed at enhancing domestic production. The bipartisan support for initiatives such as the SHIPS for America Act reflects a wider commitment to improving U.S. maritime capabilities to address potential national security threats. As this economic confrontation develops, the consequences for global shipping and commerce remain to be seen, including increased operational costs and logistical challenges in U.S. ports.

Original Source: www.nbcchicago.com

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