The global shipping industry, a vital artery of international trade, now finds itself at the heart of escalating U.S.-China tensions. In April 2024, the United States Trade Representative (USTR) launched a Section 301 investigation targeting China’s maritime logistics and shipbuilding industries, citing “unfair trade practices.” The move, aimed at reviving America’s declining shipbuilding industry and safeguarding its economic interests, has sparked debates about its effectiveness, legality, and unintended consequences.
While Washington justifies the probe as necessary for economic security, the measures it proposes—punitive tariffs, port fees on Chinese-built vessels, and shipping restrictions—could disrupt global supply chains, drive up logistics costs, and ultimately backfire on American consumers and businesses.
The U.S. Strategy: A Response to China’s Maritime Dominance
China’s dominance in shipbuilding is undeniable. Accounting for nearly 55.7% of global shipbuilding completions and over 70% of new ship orders, Chinese shipyards have cemented their position as the world’s leading suppliers of commercial vessels. The country’s advantage stems from economies of scale, a comprehensive industrial ecosystem, and sustained technological innovation. In contrast, the U.S. shipbuilding industry has been in steady decline, producing fewer than 10 commercial vessels annually and ranking 19th globally.
Faced with this stark reality, the U.S. has turned to protectionist measures to counter China’s shipbuilding prowess. Under the proposed rules, Chinese-built ships calling at U.S. ports would be subject to service fees of up to $1.5 million per voyage. Operators of vessels built in China, even if flying foreign flags, would face additional financial penalties. Moreover, the U.S. is pushing for a policy that mandates a percentage of American exports to be carried by U.S.-built and U.S.-flagged ships—an attempt to create an artificial market for its own struggling shipyards.
Pitfalls of U.S. Protectionism and Global Backlash
The problem with the U.S. approach is its economic impracticality. The U.S. container and dry bulk fleets account for less than 1.4% and 1% of global shipping capacity, respectively. Unlike China, whose shipbuilding costs remain competitive, U.S. shipyard labor costs are significantly higher—approximately $98 per hour, four times the Chinese average. Building a large fleet of commercial vessels would take decades, making Washington’s policy goals unattainable in the short term.
Additionally, the high costs of U.S.-flagged ships would ultimately be passed on to American consumers. Analysts estimate that additional tariffs and service fees could increase China-U.S. shipping costs by 15%, leading to higher inflation rates and raising the cost of consumer goods imported from Asia. Ironically, this move contradicts the U.S. government’s efforts to control inflation.
The unilateral imposition of tariffs and restrictions on Chinese-built ships raises serious concerns about compliance with World Trade Organization (WTO) regulations. According to international trade experts, the U.S. measures violate Article 23 of the WTO’s dispute settlement mechanism, which mandates resolving trade disputes through multilateral consultations. By bypassing this process, Washington risks legal challenges from China and other affected nations.
Moreover, the policy could fragment global shipping alliances. Major shipping companies, including Maersk, Mediterranean Shipping Company (MSC), and France’s CMA CGM, all have substantial Chinese-built fleets. Facing high fees at U.S. ports, these companies may reroute cargo through alternative hubs in Canada, Mexico, or Latin America, bypassing the U.S. altogether. The result? A potential decline in U.S. port activity, job losses in logistics sectors, and higher costs for U.S. importers and exporters alike.
A Policy in need of Rethinking
At its core, the U.S. strategy relies on a nostalgic vision of revitalizing an industry that has been in decline for decades. In the 1970s, the U.S. shipbuilding sector ranked first globally, producing over 70 ships annually. Today, it lags behind, producing a fraction of that number. Protectionist measures like the Jones Act, which mandates that goods transported between U.S. ports must be carried on American-built and American-crewed vessels, have long eroded competitiveness by inflating domestic shipbuilding costs.
If the U.S. truly aims to rebuild its maritime industry, it must invest in technological innovation, workforce development, and global collaboration rather than resorting to trade restrictions. Countries like South Korea and Japan, despite their strong shipbuilding industries, do not engage in punitive tariff strategies. Instead, they focus on innovation and strategic partnerships, ensuring competitiveness without disrupting global trade.
The shipping industry is the lifeblood of globalization, and its efficiency depends on cost-effective, market-driven solutions. While the U.S. accuses China of “unfair subsidies,” China’s shipbuilding dominance has been achieved through long-term investments in R&D and infrastructure. Many of the world’s most advanced LNG carriers, bulk carriers, and container ships are now Chinese-made because they are simply more efficient and cost-effective.
The U.S. Section 301 investigation into China’s shipping and shipbuilding industries is a high-risk gamble that may do more harm than good. While the intention to protect domestic industry is understandable, the reality is that America’s shipbuilding decline is a self-inflicted wound that cannot be remedied by punitive tariffs alone.
Rather than imposing barriers, Washington should focus on making its shipbuilding sector competitive through strategic investments and reforms. Protectionism will not bring back a thriving U.S. maritime industry—but it will raise costs, disrupt global trade, and push America further away from its economic goals.
Mr. Qaiser Nawab is a global peace activist, is a distinguished international expert specializing in the Belt and Road Initiative (BRI), Afghanistan, Central Asia and founder of the Belt and Road Initiative for Sustainable Development (BRISD), a newly established global think-tank headquartered in Islamabad, in conjunction with the one-decade celebration of BRI.
