Will Trump’s tariffs shape shipbuilding?

Over the last century, we’ve seen the balance of global shipbuilding has undoubtedly shifted from the West to the East. Once a leader in capacity and innovation, you’ll need to go as far back as World War II to find the peak of US shipbuilding, which by the 1970s had been surpassed by Japan, followed closely by South Korea. 

China entered the market in the 1980s, but its emergence as an industry leader took place in the early 2000s.  

“By 2024, China held the largest market share, followed by South Korea, with Japan trailing and others contributing minimally,” explains maritime specialist Jie Shi, associate at law firm Huth Reynolds.  

“Statistically, China, South Korea, and Japan’s combined global share of the three major shipbuilding indicators – outputs, new orders, and order backlog – has consistently exceeded 95%.”

From 1983 to 2013, approximately 300 US shipyards closed, and employment in shipbuilding decreased from 186,700 in 1981 to 94,000 in 2018. Long-standing arguments suggest that it’s the Merchant Marine Act of 1920, better known as the Jones Act, that has had the largest negative impact on the US shipbuilding industry.

This act was originally a national security measure to ensure a robust, domestic maritime capacity, requiring US-built, owned, and crewed vessels for domestic transportation.

Over the past century, many of its provisions, particularly the US-built requirement, have become counterproductive, says Meghan Welch, managing director of the aerospace, defence, and government services team at investment bank Brown Gibbons Lang & Company.

“Exempt from foreign competition, US shipyards have stagnated, losing the incentive to innovate. Today, building a comparable vessel in the US can cost up to ten times more than in Asia,” says Welch.

“The US domestic commercial shipbuilding sector has virtually collapsed, with remaining capacity now wholly reliant on federal defence contracts. Despite its foundational purpose, the Jones Act now serves to insulate the US industry from competitive innovation rather than sustain its relevance.”

On the other hand, the Chinese government has recognised shipbuilding as a strategic industry in recent decades and supported its development accordingly. The country’s growth in shipbuilding has also been bolstered by its large manufacturing sector.  

“China possesses the infrastructure necessary for ship construction, including steel, aluminium, parts, components, assembly and a skilled labour force,” says Shi. 

This has led to the ability to construct hundreds of vessels annually. According to Welch, China produces warships “with industrial efficiency”, supported by state-subsidised infrastructure and an industrial policy that is “explicitly designed for dual-use maritime dominance”. 

South Korea, meanwhile, sets global benchmarks in modular design, digital shipbuilding, and production efficiency, with top-tier shipyards, such as HD Hyundai Heavy Industries (HHI) and Daewoo Shipbuilding and Marine Engineering, leveraging high-throughput automation, lean production, and globally-integrated supply chains. 

“Korean shipyards deliver advanced tankers and LNG carriers in less than half the time required in the US, with far fewer delays and cost overruns. These trends present a critical inflexion point for US policymakers and investors, underscoring the urgency to modernise the domestic industrial base before strategic disadvantage becomes irreversible,” Welch warns.

The US shipbuilding industry is in a fragile state. According to Welch, only six US-operated shipyards capable of constructing deep-draft naval and merchant ships remain out of the 30 that were operating in the 1960s.  

Publicly traded shipbuilders, such as Huntington Ingalls Industries (HII), now face immense pressure, managing over $49bn in backlog while operating on margins as low as 7%. In response to these headwinds, firms like HII are diversifying away from traditional shipbuilding.  

“HII’s Mission Technologies division has secured a $3bn contract with the Department of Defence for strategic level support, cybersecurity and defence services,” says Welch. “This move represents a clear pivot away from the ‘race to the bottom’ in shipbuilding margins, towards high-margin, tech-enabled services that are aligned with broader defence modernisation priorities.” 

“We are leaning into the use of other transaction authorities and working with the Rapid Capabilities Office as a means to leverage new technologies,” Christopher Kastner, HII’s CEO, director, and president, told attendees of the company’s first quarter earnings conference.

“In April, we delivered the first two Lionfish small uncrewed undersea vehicles to the US Navy under a programme that could scale to 200 vehicles. This was delivered in partnership with the US Navy and the Defence Innovation Unit, to accelerate adoption of dual-use commercial technologies into US Department of Defence programmes.”

To further complicate the situation, President Trump’s introduction of tariffs disproportionally impacts the maritime sector. While at the time of writing, many of these are currently ‘on hold’ or have been subject to amendments, as the tariffs – especially those related to steel – do come into effect, they could lead to more issues for already struggling shipbuilders.

“Dependence on Asian-sourced ship components and materials renders the US sector vulnerable to tariffs, sanctions, and changing regulatory frameworks,” notes Shi. “As US Treasury Secretary Scott Bessent said in May, the tariffs effectively create an embargo, which is something neither country wanted.”

But is there good news on the horizon for US shipbuilders? Earlier this year, an executive order was drafted in the US that showcases a government-wide overhaul of the US commercial and military maritime sectors, aimed at reducing the gap between the country’s shipbuilding capabilities and those of China. 

This includes the creation of a new maritime industrial base office within the White House’s National Security Council and “special tax incentives to bring this industry home to America, where it belongs,” Trump told US Congress in March. 

Multiple cabinet secretaries have now been tasked to build a ‘maritime action plan’, which must include a probe into China’s shipbuilding industry, the creation of maritime ‘opportunity zones’ to promote investment, and the development of a maritime security trust fund that would be used to fund financial incentives. 

This political momentum could present strategic opportunities. According to Welch, federal backing, public-private partnerships, digital modernisation programmes, and workforce retraining initiatives could all help to reinvigorate the industry. 

“The success of these efforts will depend on how well policy aligns with industrial realities and how flexibly it can respond to global supply chain dynamics,” she concludes.