One year ago, President Donald Trump opened his second term with an avalanche of executive orders in his first three months in office. Many made immediate, decisive changes to policies governing key segments of the economy—energy, mineral production, and banking.
Plans to make ambitious changes in the commercial shipping and shipbuilding industry have taken longer to develop. But the need for action is no less urgent.
Today, 95 percent of the world’s shipbuilding is concentrated in East Asia, either in China or within first-strike missile range of China. America has no control over the maritime supply chains that collapsed following the pandemic, while China has the power to shut them down intentionally. America’s ability to deploy troops overseas is limited because its shipping fleet is too small to sustain them.
An April executive order titled “Restoring America’s Maritime Dominance” identified these risks, outlined broad goals, and promised a “Maritime Action Plan” (MAP) by early November. No such plan has been released yet. Nor has Congress made meaningful progress toward advancing comprehensive legislation with bipartisan support—the SHIPS For America Act.
Until Washington acts, our maritime deficit will only continue to grow.
Many Americans have become aware of that deficit. Few understand what to do about it. Some would do nothing, doubling down on the de-industrialization gamble that created this problem. Others would wager heavily on favored technologies or shovel massive subsidies into the industry in hopes of catching China. A few misguided pundits blame US laws—or the companies and labor unions themselves—for the industry’s weaknesses.
If America is to close its maritime deficit, political leaders must accept the fact that doing so will either cost taxpayer money or require a fundamental change in global trading rules—or both.
America’s maritime sector is in a very deep hole because, for generations, global trade has operated under rules that allow any ship from any country to serve American import-export markets. Shipping companies scour the globe for the cheapest costs to build and operate ships. Shipping and shipbuilding businesses with American labor, regulatory, and tax costs cannot match the prices of those companies. The US government did little to preserve the American maritime industry, which faced significant disadvantages.
China holds all the cards in that environment. Its costs for labor, steel, and other key inputs are a small fraction of those in the United States and other advanced economies. Beijing supercharged those advantages with massive government support, creating a historically dominant commercial maritime industry. It did so because of the strategic value of building a strong commercial maritime industry in support of China’s global ambitions.
The long-term solution is to change the rules. International aviation—the industry most comparable to global shipping—provides a template. Under the 1944 Chicago Convention on International Civil Aviation, ratified by 133 countries, nations retain sovereign control over their airspace and may grant or deny operating authority to foreign airlines. As a result, stateless “flags of convenience” (FOC) aircraft are virtually nonexistent. Three of the top five global airlines are American.
Contrast that framework with the OECD “Understanding on Common Shipping Principles,” a non-binding “gentlemen’s agreement” signed in 1993 by 32 countries (including the United States but not China). While the Chicago Convention rejects FOC aircraft, the OECD agreement promotes FOC ships by prohibiting nations from discriminating against them. China dominates the maritime industry.
America surely has the sovereign right to change the rules governing shipping companies’ ability to serve US import-export trades. I noted as much three years ago at the end of a report analyzing the risks that China’s maritime dominance poses to American military and economic security. That report included detailed recommendations for growing America’s maritime industry. The SHIPS Act adopts those recommendations as the backbone of industry revival.
I also acknowledged that those recommendations were made “against the backdrop of an unchanged…regulatory system.” While the case for fundamental regulatory change is compelling, it is also a politically explosive idea that would require comprehensive analysis, negotiations, and buy-in.
That political assessment may no longer hold in the context of an aggressive administration willing to reject international rules and institutions that harm America. In addition to decimating America’s maritime industry, long-standing shipping rules also enable hundreds of shadow fleet ships to evade sanctions. Replacing it could eliminate those ships, strengthen supply chain resilience, and expand the scope of responsibility for protecting freedom of navigation.
But debating those rules will take time, and the outcome is uncertain. What is clear is that Congress and the administration should act now to pass and implement the key elements of the SHIPS Act—particularly the Strategic Commercial Fleet Program. This program would jump-start US commercial shipbuilding by providing a consistent demand signal to US shipyards. It will close the sealift gap and help strengthen maritime supply chains.
The program would achieve these key goals with the minimum taxpayer support possible, covering only the incremental cost of “Americanizing” modern ships that earn most of their revenue in international commercial markets. Those ships and their American crews provide the Pentagon with the most cost-effective standby sealift capacity. With an annual competitive bidding process, the program allows further savings if future regulatory changes mandate or incentivize greater use of American ships.
We’ve reached a decision point on rebuilding America’s commercial maritime industry. Chinese president Xi Jinping has directed his military to be ready to take Taiwan by force by the end of next year. Time is not on America’s side.