The Ship Wars 🚢

Ships!

They are giants made of steel that cut across majestic oceans. They were once weapons that helped armies win wars and empires conquer continents.

Today, they are far more than machines. They are the lifeline of modern trade, carrying everything from iPhones and oil to the grains that erase hunger. 

In fact, ships power the economies of modern nations, and at the very top sits the United States — the world’s largest importer, whose appetite shapes shipping lanes and port traffic across the planet.

According to the Bureau of Economic Analysis, the U.S. imported $3.29 trillion worth of goods and exported $2.08 trillion in 2024, and most of that trade was carried by ships.

Last year alone, 84,034 port calls were made by 11,273 vessels, according to U.S. Coast Guard data.

Interestingly, a significant share of those vessels trace their origins back to China. According to data from Pole Star Global, Chinese-built, owned, or operated ships made 14,295 port calls across 252 U.S. ports in 2024 — nearly a fifth of all U.S. port traffic.

The U.S. government wants to change this. 

In an unprecedented move on 14th October 2025, Washington introduced a new port entry fee targeting vessels built, owned, or operated by Chinese interests. 

And Beijing was not idle. 

To retaliate, China announced reciprocal port fees on U.S.-linked vessels — taking effect the very same day the U.S. tariffs went live — making ships and ports the new frontier of the U.S.–China trade war.

In this issue of CrossDock, we break down the story behind the new port fees imposed by both sides and why they were introduced. Additionally, we examine how this could affect the Trump administration's effort to revive the U.S. shipbuilding industry.

However, to better understand all this, we need to know the story behind China’s dominance and the US’s fall in shipbuilding.

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The nineties were truly nervous for China. This was the decade in which the country witnessed rapid economic development, its cities swelling, and the majority of people moving from agricultural fields to assembly lines. In 1980, China’s GDP stood at around $191 billion. By 1990, it had more than doubled to nearly $390 billion—a byproduct of China’s rapid industrialization. 

However, its shipbuilding industry was still in its infancy. Shipyards were small and underdeveloped, many lacking proper drydocks or modern equipment to build large vessels. The country’s global share of merchant ship tonnage in the 1990s stood at barely 5%. In contrast, Japan controlled around 45%, and South Korea held nearly 35%. 

But all that changed in a decade. 

China’s turning point came in 2001, the year it joined the World Trade Organization. Trade exploded after that. Imports and exports skyrocketed, and China was quietly becoming the world's manufacturing hub. But there was an anomaly in this success. 

The ships that imported and exported these goods were mainly bought from Japan or South Korea, and China was not happy about it.

In 2002, then–Premier Zhu Rongji visited the China State Shipbuilding Corporation (CSSC), one of the country’s two main shipbuilding conglomerates, and made his ambition clear: “China hopes to become the world’s largest shipbuilding country in terms of output.”

That message became policy. It aimed to increase annual shipbuilding production to 15 million deadweight tons by 2010 and 22 million deadweight tons by 2015.

Shipbuilding was formally designated a strategic sector in the 10th Five-Year Plan, thereby giving it national priority. From there, state funding started pouring in. 

Between 2006 and 2013, Beijing provided roughly $91 billion in direct subsidies to shipbuilders — an amount equal to 46% of the industry’s total revenue during that period, according to a Center for Strategic and International Studies (CSIS) report.

If subsidies were one part of the equation, loans were the other.

Between 2010 and 2018, China extended at least $132 billion more in state support to shipbuilding and shipping companies — primarily through preferential loans from state-owned banks, according to the same analysis.

The combined effect was enormous. 

This helped China’s shipyards to build ships faster, cheaper, and on a greater scale than anyone else. The government’s control over steel, financing, and logistics gave it a fully integrated industrial base that Japan and South Korea couldn’t replicate.

For example, according to a report by the Organisation for Economic Co-operation and Development (OECD), China’s shipbuilding sector is deeply interlinked with the rest of its industrial base — with 97 out of 116 industrial sectors connected to shipbuilding through upstream and downstream supply chains.

What these advantages necessarily translated to was that China could now undercut competition by making ships much cheaper.

And the result? By 2009, China had overpowered both Japan and South Korea to become the world's largest shipbuilder and had met both the goals it set in 2002.

Soon, major ocean carriers like MSC, CMA CGM, and others began placing new vessel orders in China. Today, China dominates global shipbuilding, accounting for around 50% of all commercial ship production and about 62% of new ship orders placed worldwide. From tankers and bulk carriers to container ships, Chinese yards have become the default builders for the world’s largest shipping lines.

But while China has climbed to the pinnacle of global shipbuilding over the past few decades, the United States has fallen from glory.

American shipyards once defined industrial power.

During World War II, they employed more than one million people, turning out Liberty ships and destroyers at a pace unmatched in history. But in the decades that followed, that dominance faded.

In the 1970s, U.S. yards still built around 5% of the world’s total tonnage, delivering roughly two dozen new ships a year. Today, that number has slowed to a trickle. The U.S. accounts for barely 0.1% of global shipbuilding output as of 2023. The few commercial vessels still made in America come from just two active yards — one in Philadelphia and another in San Diego

Three forces led to the decline.

First, rising labor and regulatory costs made American-built ships far more expensive than their Asian counterparts. For example, building a single large container ship in the United States can cost three to four times as much as in China — roughly $200–250 million versus $60–70 million.

Second, foreign subsidies and state-backed financing, mainly from Japan and later South Korea and China, priced U.S. yards out of the global market.

And third, Washington’s own policy neglect — focused on military contracts while abandoning commercial shipbuilding — left the industry without the scale or capital to compete.

Today, only about 80 U.S.-flagged ships operate in international trade — a tiny fleet compared to the more than 5,500 China-flagged vessels that dominate global waters. The China State Shipbuilding Corporation (CSSC) — the country’s largest shipbuilder — now produces more commercial vessel tonnage each year than the entire U.S. shipbuilding industry has built since the end of World War II.

And the U.S. wants to fix this massive gap.

Reviving American shipbuilding has been one of the few issues to draw bipartisan support in Washington. In 2024, the Biden administration launched a Section 301 investigation into China’s shipbuilding and maritime practices. The probe, led by the U.S. Trade Representative (USTR), accused Beijing of using “non-market policies and massive subsidies” to dominate the global shipbuilding industry and undercut foreign competitors.

That investigation set the stage for what came next.

When Donald Trump returned to the White House in 2025, the tone shifted from inquiry to action. President Trump vowed to “make American ships great again,” and thus came the US port fees — a new port entry fee on vessels built, owned, or operated by Chinese entities — marking the first time the U.S. has directly targeted foreign-built ships at its ports.

Implemented on October 14, Chinese-operated ships now face a levy of $50 per net ton on their first U.S. port call of the year, with the rate scheduled to escalate annually through 2028. For vessels merely built in China but operated by foreign shipping lines, the higher of $18 per ton or $120 per discharged container applies.

However, what’s worth noting here is that these fees may be waived or refunded if shipowners place an order for a U.S.-built vessel within three years,

Now, let’s break down how these fees translate into costs for ocean shipping companies. 

According to HSBC Global Investment Research, a carrier bringing a 10,000-TEU containership built in China to the U.S. will pay between $1 million and $2.7 million per voyage, with those costs set to rise annually, reaching as much as $7.4 million by 2028. 

Global shipping giants have begun adapting to this new norm. For example, companies such as MSC and CMA CGM have begun rotating Chinese-built vessels out of U.S. trade routes, substituting them with ships built in South Korea and Japan to limit exposure.

Interestingly, no major shipping company has announced a price hike owing to this. “Although this new fee structure may present certain challenges, MSC does not plan to introduce any USTR-related surcharges at this time,” the MSC said in a statement. 

However, the fees are already having a direct impact on Chinese-owned ships as expected. 

Within the first week of implementation, Chinese shipping giants COSCO and OOCL together paid over $42 million in port fees from just 15 U.S. port calls. Based on current deployment patterns, analysts estimate their annual exposure could exceed $2 billion, roughly 7% of their combined revenue.

Shipping data provider Alphaliner warned that the new U.S. port fees could also cost the world’s top 10 carriers up to $3.2 billion next year.

Experts also believe that global ship orders to China will decline as carriers rethink their exposure to U.S. port fees. 

Maersk, the world’s second-largest ocean carrier, currently has a fleet that is about 20% Chinese-built. CMA CGM’s fleet is roughly 41% Chinese-built, with 54% of its future ships also being built in China. Hapag-Lloyd shows similar dependence — about 21% of its fleet is Chinese-made, and nearly 89% of its upcoming orders are tied to Chinese shipyards.

But this dependence on China could come down as port fees affect their bottom line.

That is why Beijing wasted no time hitting back. 

On October 10, 2025, China’s Ministry of Transport announced it would begin levying special port fees on American vessels starting October 14 — the same day Washington’s charges on Chinese ships were set to take effect. The retaliatory fees begin at 400 yuan ($56) per net ton, rising each year to 1,120 yuan ($157) by April 2028. The measure targets U.S.-built, U.S.-owned, and U.S.-operated vessels

If the port fees are one part of Washington’s strategy to revive U.S. shipbuilding, the other is Friendship.

Central to this “Friendship” strategy is the United States’ long-time ally in the Pacific — South Korea, now a key partner in reviving America’s shipbuilding industry. 

In October, the White House announced a wave of multibillion-dollar Korean investments in U.S. shipyards, following President Trump’s meetings in Seoul. South Korean President Lee Jae Myung’s administration pledged roughly $150 billion to help rebuild American shipbuilding capacity through modernization, workforce training, and new construction programs.

And then there’s Japan — the world’s third-largest shipbuilding nation, and another crucial pillar in Washington’s maritime revival strategy.

Recently, the U.S. and Japan signed a Memorandum of Understanding (MoU) to expand shipbuilding cooperation, with Tokyo committing to invest in modernizing U.S. yards and sharing advanced design and manufacturing technologies. 

So how is China reacting to this? Let’s break it down. 

Beijing isn’t just answering Washington with tit-for-tat port fees.

It’s also trying to derail the U.S. shipbuilding revival at its source — by targeting America’s closest partners.

In late October, China’s Commerce Ministry announced new sanctions on Hanwha Ocean and its U.S.-linked affiliates, citing vague “national security concerns”

The move effectively bans transactions and cooperation between Chinese firms and Hanwha’s American subsidiaries — including Philly Shipyard.

At the same time, China is tightening its own grip on global shipbuilding through consolidation. In one of the industry’s biggest restructurings, Beijing has backed a mega merger between its two largest state-owned shipbuilders — China State Shipbuilding Corporation (CSSC) and China Shipbuilding Industry Corporation (CSIC) — creating a single industrial powerhouse that now controls over 20% of global shipbuilding capacity. 

The merger, finalized after years of coordination, gives China an unparalleled ability to centralize resources, coordinate military and commercial production, and dictate global pricing power across shipyards, components, and financing.

For now, carriers and shippers say the new fees will not be passed down, but retail federations and trade associations warn that the costs are inevitable. If the fees remain in place for a long time, analysts believe they will gradually ripple down the supply chain, ultimately hitting importers, exporters, and consumers alike.

Beyond trade, the implications can be much more profound. It could reshape shipping routes, change fleet deployment, and even redirect future shipbuilding orders, redefining how — and where — the next generation of ships are built. 

This newsletter was written by Shyam Gowtham

Thank you for reading. We’ll see you at the next edition!