U.S.-China Trade Tensions in Shipbuilding: Strategic Industrial Policies and Global Market Implications

The U.S.-China rivalry in the shipbuilding sector has intensified into a strategic battleground, with profound implications for global defense procurement and steel markets. As both nations deploy industrial policies to secure maritime dominance, investors must navigate a landscape shaped by tariffs, subsidies, and geopolitical realignments.

U.S. Industrial Policies: A Defensive Push

The U.S. has adopted a multi-pronged strategy to counter China's 53.3% global shipbuilding capacity by 2025, according to a CSIS analysis. Central to this effort is the USTR's Section 301 tariffs, which impose docking fees of up to $46 per net ton on foreign-built vessel operators, per a USTR announcement. These measures, supported by bipartisan labor unions, aim to curb China's "unreasonable" trade practices, including forced technology transfers and state subsidies, the USTR statement said. Complementing these tariffs is the SHIPS for America Act, which proposes a Maritime Security Trust to fund infrastructure and workforce development, as Reuters reported.

However, U.S. efforts face headwinds. By 2023, the U.S. had ceded 0.13% of the global market to China's 53.3%, reflecting decades of policy neglect and reliance on foreign shipyards, as USNI noted. Critics argue that recent administration cuts to maritime programs and strained alliances have further weakened the domestic industrial base, the Washington Monthly argued.

China's State-Driven Dominance

China's shipbuilding ascent is underpinned by a 20-year industrial policy framework. The government provides entry subsidies (e.g., below-market land prices), investment subsidies (low-interest loans), and production subsidies (cheap steel and export credits), according to an Urbanomics analysis. By 2025, state-owned enterprises like China State Shipbuilding Corporation (CSSC) controlled 74.1% of global new orders, CIMSEC reported. This dominance extends to high-value vessels, including LNG carriers and green-fuel ships, aligning with the "Made in China 2025" initiative, ShipUniverse reported.

China's steel sector, accounting for 55.7% of global shipbuilding completion volume, benefits from a 28.9% year-on-year surge in shipbuilding steel plate production in 2025, Fastmarkets reported. These cost advantages-low labor expenses, efficient supply chains, and subsidized materials-ensure resilience against U.S. tariffs, which analysts predict will have "minimal long-term impact," according to S&P Global research.

Global Defense Procurement: A Shifting Landscape

The U.S. is increasingly wary of China's Military-Civil Fusion strategy, which integrates commercial and naval shipbuilding. This has prompted allies to diversify procurement away from Chinese yards. For instance, the European Union and Japan have accelerated investments in domestic shipbuilding to avoid reliance on Chinese vessels linked to dual-use technologies, the CSIS analysis found.

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