The proposed measures stem from a trade investigation that began under the Biden administration and concluded shortly before Donald Trump’s presidency. The inquiry determined that China’s dominance in shipbuilding and shipping logistics was achieved through practices that undercut competition, necessitating regulatory action.
If implemented, the fees could increase shipping costs, which may be passed on to American consumers. However, it remains uncertain whether the measures would significantly boost U.S. shipbuilding, a sector that has declined despite long-standing protectionist policies like the Jones Act.
China's Market Share and Industry Impact
China’s share of global commercial shipbuilding has grown from less than 5% in 1999 to more than 50% in 2023. The country owns 19% of the global commercial fleet and controls 95% of the shipping container production, according to the USTR. China, South Korea, and Japan collectively account for more than 90% of commercial shipbuilding worldwide.
While the U.S. maintains strong warship production, it ranks 19th in global commercial shipbuilding, producing fewer than five commercial vessels per year. In contrast, China builds over 1,700 annually. The USTR attributes China’s industry dominance to factors including low pricing, state support, and labor practices that reduce costs below global market levels.
Proposed Fees and Shipping Requirements
The USTR’s proposal includes several key measures:
- A service fee of up to $1 million for Chinese-built vessels entering U.S. ports.
- A phased requirement for U.S. exports to be transported on American-flagged and -operated vessels, starting at 1% and increasing to 15% over seven years. Eventually, these vessels would also need to be U.S.-built.
These restrictions would build upon the Jones Act, which already mandates that goods transported between U.S. ports be carried on U.S.-built, -registered, and -crewed vessels.
Next Step
The proposed fees and restrictions will be subject to public comment and review, with a hearing scheduled for next month. The USTR is seeking to finalize its decision within the statutory deadline, even as Trump’s nominee for trade representative, Jamieson Greer, awaits confirmation.
If implemented, the measures could create opportunities for South Korean and Japanese shipbuilders by making Chinese-built vessels more expensive to operate in U.S. waters. However, the broader impact on global shipping costs and U.S. industry competitiveness remains uncertain.
