Why Trump’s shipbuilding tariffs won’t revive US industry

As was expected, US President Donald Trump is pursuing many of the trade policies from his first term (2017–2021), rather with a more aggressive and assertive approach. His previous trade policy was characterized by a preference for unilateral actions, tough negotiating tactics, and a focus on reducing the trade deficit while protecting domestic industries. His ‘Make America Great Again’ economic policy (Maganomics or Trumponomics) focuses on tax cuts, deregulation, and efforts to lower interest rates and inflation, though its broader economic impact remains a subject of debate.

Apparently, Trump is taking on friends and foes alike, but in effect, his protectionist trade policies are primarily aimed to stymie China’s economic rise. In the latest assault, the Trump administration is targeting China’s maritime logistics and shipbuilding industries. The Section 301 investigation launched by the Office of the United States Trade Representative (USTR) in April 2024 seeks to slap punitive fees on Chinese ships and make it mandatory that a certain percentage of US exports be transported by US-flagged vessels. The stated goal of the Trump administration is to revive the ailing US domestic shipbuilding industry, but the move ultimately falls into a triple paradox that highlights the inherent contradictions of protectionism in an era of globalized economies.

China has become the dominant force in global shipbuilding in just two decades, now accounting for over half of the world's commercial ship production, while the US global market share has slumped to a mere 0.8%. However, China’s spectacular rise in the shipbuilding sector is not an artificial advantage created by subsidies, but the result of scale efficiency and market-driven innovation. Today, China has the most comprehensive shipbuilding industrial chain in the world, making ultra-large ships more cost-effective. The China State Shipbuilding Corporation built more commercial vessels by tonnage in 2024 than the entire US shipbuilding industry has since World War II. Over 30% of new ship orders globally depend on Chinese-made components, even when Southeast Asian manufacturers handle segmented production.

On the other hand, the US shipbuilding capability has declined to the extent that it currently has only four active public shipyards compared to China’s 35. The Trump administration is clearly alarmed by this. However, it should realize that imposing tariffs, using coercive tactics, and restricting trade flows will not change this equation. It will instead increase costs for American businesses relying on global shipping.

The fall of the US commercial shipbuilding industry warrants some serious self-reflection instead of conveniently externalizing the problem. The United States has gradually but consciously moved away from treating shipbuilding as a strategic industry since the 1980s, allowing its market share to shrink. However, protectionism through tariffs and mandates won’t revive such an industry — it requires workforce development, technological investment, and supply chain restructuring, none of which can be achieved overnight. It would take the US at least 15 years to rebuild a 300,000-strong industrial labour base, given that the average age of shipbuilding workers is 52 years, while young craftsmen make up less than 15% of the existing workforce.

The Trump administration needs to realize that protectionist policies cannot solve the stark cost disadvantage of US shipbuilding. The labour costs at American shipyards are significantly high — $98 per hour — while in China it’s 4.3 times lower. Moreover, America’s domestic supply chain has also deteriorated, with key components like marine crankshafts and propulsion systems now being entirely imported. Even if the US were to force domestic ship production, it would struggle to compete on price, making the entire effort economically unviable.

The Section 301 investigation is essentially a strategic attempt to scapegoat China for the failure of US industrial policy, rather than rectifying structural problems at home. The Trump administration’s move carries the risk of further fragmenting the global supply chain, jeopardizing the very economic stability that accrued from globalization. Shipping is the backbone of international commerce, and disrupting open competition in the shipbuilding industry would upend the entire edifice of global trade.

Moreover, these sanctions flout World Trade Organization (WTO) rules from a trade perspective, further undermining America’s credibility in international trade relations. Increased transportation costs will put economic strain on countries and industries that rely on cost-efficient maritime logistics, meaning American businesses and consumers will ultimately take the hit.

A realistic analysis would show that the American shipbuilding industry’s decline is part of a broader trend of deindustrialization. Since the end of the Cold War, the United States has largely given up the production of crucial industrial goods, from smartphones to aluminum. The once-bustling shipyards that built the world’s largest liners have since morphed into national parks, naval air stations, or commercial container terminals. Let’s be honest, this shift wasn’t forced by China; it was a consequence of economic choices made by successive US policymakers in pursuit of lower costs and higher profits.

According to Forbes magazine, the US industrial decline is a result of conscious offshoring and financialisation, where industries that were no longer deemed profitable were left to wither. It states that the US stands as a dominant force in global outsourcing, with a striking 66% of American companies subcontracting at least one department. There’s a need to understand the real issue because protectionist measures are unlikely to reverse decades of deindustrialization. It requires strategic investment in education, infrastructure, and technology to reclaim the ground lost.

Protectionism would only distort markets, increase costs, and undermine global trade practices. The Trump administration should instead adopt a realistic industrial policy that prioritizes innovation, workforce development, and strategic investments. Like many others, the shipbuilding industry thrives on economies of scale and international collaboration. Trump should focus on reviving America’s own industrial capabilities through long-term policies instead of penalizing China for its hard-earned competitive edge.

The Section 301 investigation into China’s shipbuilding industry is representative of a broader problem with Trumponomics — it is reactive rather than proactive, punitive rather than constructive. If the Trump administration seriously wants to resurrect America’s shipbuilding industry, it should take the real challenges head-on; otherwise, protectionist policies will remain a paradox — an attempt to force high-cost domestic production at the cost of American businesses and consumers, only to contain the rise of a country it considers the “strategic rival”.