Overview
The Trump administration has begun to embrace demand-side measures to revitalize US shipbuilding capacity, such as port fees on subsidized Chinese vessels. However, supply-side investments in US shipyards—renovating dry docks, expanding facilities, training workers—will require a few years, even on an ambitious timeline. In the meantime, top foreign shipbuilders from South Korea and Finland have partnered with American shipbuilders, transferring their production techniques, receiving American ship orders, and providing a potential short-term solution to dramatically upscale US shipbuilding. In terms of upside risks, Western shipbuilders, through increased partnership, may remain competitive despite cost pressures and limited facilities. On the downside, foreign direct investment must navigate pinched global ship demand, likely through some state support.
The Decline of US Shipbuilding, in Context
In the 1970s, US commercial shipbuilding capacity comprised 5% of global demand, producing up to two dozen ships per year. In 2024, the US comprised just 0.13% of the global commercial orderbook. Unlike its Asian competitors, US shipbuilding firms are not vertically-integrated, leaving vital intermediate components—like propulsion systems and electronics—dependent on a network of subcontractors, which creates bottlenecks and extends lead times. As a result of declining competitiveness, the number of active US shipyards capable of building large vessels has declined by 80%. When the US does produce large commercial ships, they sell at four to five times the global market price—an inefficiency that, rather than correcting through competition, is sustained by an artificial demand floor imposed by the Jones Act, which mandates that US domestic shipping (e.g., Hawaiian imports from California) use US-built vessels.
As domestic commercial shipbuilding has faltered, most shipyards and workers have been employed in the naval shipbuilding sector, which produces cutting-edge systems but suffers the same problems as the broader US defense industrial base, with a naval duopoly—Huntington Ingalls and NASSCO—prioritizing workshare for complex and high-end vessels, like nuclear-powered submarines, leaving little capacity or incentive to build smaller, less profitable ships. Current US shipbuilding policy incentivizes competitive bidders, not mass, economies of scale, or market competitiveness.
Meanwhile, global competitors continue to employ industrial policies to stay ahead. China’s model, focusing on scalability, has cornered the global market. In 2024, China’s share of the global orderbook was 3,419 ships comprising 260.8 million deadweight tonnage (DWT), or 71% of all ships and 76% of global DWT. This dramatic rise is owed partially to global shipping companies frontloading their orders of Chinese-built vessels before the conclusion of a Biden-era USTR Section 301 investigation announced in 2024 (indeed, data for 2025 reflects a drop, as China’s newbuilding orders, in terms of net tonnage, are 66% less than in 2024). China’s shipyards are heavily subsidized, potentially receive exaggerated orders from Chinese state-owned shipping giants, and produce simultaneously for commercial shippers and the People’s Liberation Army Navy. Shipyards do turn over, given the high risk in the thin-margin industry and mistimed shipyard expansions with global demand, but China prioritizes scalability.
Shipbuilders from South Korea and Japan—typically vertically-integrated conglomerates that produce many industrial goods, from ships to autos—are also globally competitive, but are losing ground, comprising a cumulative 43.6% of the global orderbook in 2022 but only 28% in 2024. Frontloaded orders of Chinese-built vessels can justify some of this decline, but Chinese overcapacity has imposed significant cost pressures. To remain competitive, Korean and Japanese firms prioritize specialized vessels, such as LNG tankers or dual-fuel vessels, but these comparative advantages might not outlast China’s shipyard expansion. Population decline in both South Korea and Japan means a labor shortage, incentivizing Korean and Japanese firms to acquire, retrofit, and partner with shipyards abroad.
A US Shipbuilding Strategy Takes Shape, Leveraging Partnerships
The US has embarked on some initial demand-side policies to rekindle domestic shipbuilding. Namely, the US imposed new port fees on Chinese-owned, -operated, and -built vessels as a result of the Section 301 investigation, starting at $50 per net tonnage on October 14 and set to increase to $140 by 2028. Supply-side policies are still being workshopped, but the Trump administration is considering utilizing Defense Production Act Title III authorities and the creation of a Maritime Trust Fund to rapidly upscale investments across the shipbuilding supply chain. Whatever the outcome, the policy will likely outlast the Trump administration, given the bipartisan emphasis on rekindling domestic shipbuilding and reducing dependencies, most reflective through the reintroduced SHIPS Act.
Nonetheless, a shipbuilding strategy must account for time. Even with ambitious incentives, reopening, expanding, and commissioning new US shipyards could take years. Supply-side investments cannot occur overnight, including in available dry docks, facility renovations, acquiring land, or upskilling a shipbuilding workforce. This presents a synthesis of problems that the US has moved to exploit: On the one hand, established allied shipbuilders are struggling to compete with China’s cost-effective scale and have a pinched workforce, and on the other, the US is eager to expand its shipbuilding capacity and secure a supply of ships for the US Navy and Coast Guard.
A model of allied cooperation is already in play. Hanwha, South Korea’s second-largest shipbuilder, acquired Philly Shipyard (the largest operating American commercial shipyard) in 2024 for $100 million. In August 2025, Hanwha announced $5 billion in investment to expand Philly Shipyard facilities and transfer its digitally-enabled production techniques, including the use of collaborative robots for welding, computer-aided design, and virtual-reality training models. The aim is to scale Philly Shipyard’s production capacity from less than two vessels annually to 10 by 2030. The deal showcases how the US and allied shipbuilders can team to solve their respective problems. Hanwha can ramp-up production outside Korea to meet demand spikes, and Philly Shipyard bolsters its production and competitiveness.
Another Model Emerges: The US-Finland Icebreaker Deal
Recent US-Finland icebreaker cooperation is another model for allied cooperation, but first, some context. Icebreakers are a specialized vessel able to navigate and clear sea ice, such as to clear obstructions in Arctic ports or conduct search-and-rescue missions. These ships are vital for maritime access in the Arctic, an increasingly important region for trade and military readiness, but they are difficult to build. The US currently only possesses two icebreakers, both past their intended 30-year service life, while rivals like Russia have upwards of 40. Finland, an Arctic power and a new NATO ally, provides indispensable expertise, designing 80% and producing 60% of all icebreakers globally. Finnish icebreakers cost about a fifth of US designs and can be finished within two years. Finnish designs are also the most advanced, such as the Polaris vessel, an LNG-powered icebreaker with a 50-year service life.
On October 9, 2025, the US and Finland concluded a memorandum of understanding for the US to procure 11 Finnish-designed icebreakers for $6.1 billion in a collaborative workshare with US firms. The first four will be built among Finland’s two icebreaker champions—the Helsinki Shipyard and the Rauma shipyard—and be delivered by 2028. Under the second phase, these companies will help build seven additional Finnish-designed icebreakers in the US. Three will be built by Davie, a Canadian firm that owns a majority stake in Helsinki Shipyard and acquired dormant shipyards in Texas. Four will be built by Bollinger, the current contractor for the US Polar Security Cutter Program, in Louisiana.
This deal is unique, given that icebreakers are highly specialized ships and the final customer is the US Coast Guard, as opposed to private shipping companies. Nonetheless, aspects of the deal could be applied to the commercial sector, such as building American ships in allied shipyards while American shipyards are retrofitted, expanded, and staffed. Combined with Hanwha’s investments in the Philly Shipyard, the US-Finland icebreaker deal suggests that an emerging US shipbuilding industrial policy is embracing allied scale, in which top shipbuilders bring their know-how and production techniques to American shipyards and, while those investments take shape, keep their own domestic facilities busy by building American ships.
Business Risks
The US is still finalizing its strategy to expand domestic shipbuilding, but the Hanwha-Philly Shipyard and US-Finland deals provide the trappings of a potential trend, especially since the Trump administration seeks to spur foreign direct investment in American manufacturing as a dimension of its “reciprocity” trade strategy. The upside risks for these potential deals are self-evident: foreign shipbuilders can expand their operations, productive capacity, and workforce if they expand to the US, while American shipbuilders are revitalized, and the US gains a secure shipbuilding supply chain outside China’s influence. Policy momentum to support US shipbuilding is strong, especially since a scenario of geoeconomic decoupling would otherwise jeopardize US naval and shipping capabilities.
However, there are downside risks that could potentially constrain a shipbuilding renaissance. First, the global shipbuilding industry is facing Chinese overcapacity. China is concluding its “second-wave” shipbuilding expansion as new orders are projected to decline and reemerge in 20 years, when new ships from 2020-2024 need to be replaced. While this is bad news for individual Chinese shipbuilders—especially those that are not state-owned—it is also bad for Western ones, who must specialize in certain segments and customers to compete. Allied shipbuilders may also hesitate to invest in US shipbuilding capacity if the US does not derisk these investments with supply-side policies. Shipbuilding has entered trade war crosshairs, with China imposing similar port fees on the US, investigating “foreign support” for US actions, and sanctioning five Hanwha affiliates to punish the firm’s acquisition of Philly Shipyard.
