Chinese Dragon – The New Ruler of the Seas 3. The American Eagle Returns to Protectionism: The Shipbuilding Revival Bill

The “Shipbuilding and Port Infrastructure for Prosperity and Security of America Act of 2025,” or the “Shipbuilding for America Act of 2025” (SHIPS Act), was drafted in 2024, though committee deliberations in Congress are proceeding slowly, and it remains unclear when or whether it will be passed.

The bill highlights the critical state of American shipbuilding and maritime cargo transportation. The global maritime transport economy is estimated at $3–6 trillion. However, vessels owned by American shipowners carry less than 2 percent of international commercial cargo by weight destined for the United States itself.

During World War II, the U.S. merchant fleet helped secure Allied victory with over 10,000 oceangoing vessels. Today, the United States has fewer than 200 such ships, with only about 80 engaged in international trade — compared to more than 5,500 Chinese-flagged vessels.

Currently, the United States has only about 20 shipyards capable of building oceangoing vessels — compared to over 80 at the end of World War II.

As of 2023, fewer than five orders for oceangoing vessels were placed at U.S. shipyards, compared to more than 1,700 at shipyards in the People’s Republic of China. According to the Office of Naval Intelligence, China has emerged as the world’s leading shipbuilding and maritime nation, with shipbuilding capacity 230 times (!) greater than that of the United States.

With only 12,000 U.S. merchant mariners working on oceangoing vessels, the United States may not have enough sailors to fully operate strategic sealift ships required in a future prolonged conflict.

The main objectives assigned to the bill include the following:

• Create a more favorable domestic and global maritime environment for U.S. vessels engaged in international trade, shipbuilding, ship repair, maritime logistics, maritime labor, and naval operations, ensuring guaranteed access to the world’s oceans free from coercion by strategic competitors and asymmetric adversaries.
• Increase domestic shipbuilding and repair capacity through programs and policies that promote the growth of U.S. shipyards and the maritime industrial base, expand military sealift capabilities, strengthen the shipbuilding workforce, and enhance national security.
• Revive the U.S. international fleet and create comparative advantages for the United States through targeted incentives and regulatory reforms to make the fleet competitive with foreign carriers and secure a sustainable share of the global maritime market, thereby strengthening supply chains, improving economic security, and reducing costs while shielding the U.S. economy from economic coercion.
• Take all necessary measures to ensure sufficient military, civilian, and commercial resources are available and have guaranteed access to meet U.S. defense deployment and core economic needs in times of crisis, war, or peace.
• Recognize that a dynamic commercial shipbuilding industry ensures supply chain resilience and scale economies that enhance military, coastal, and government shipbuilding while supporting military operations through strategic sealift to defend freedom of the seas.
• Build on America’s comparative advantages in innovation to improve competitiveness in the global maritime market, increase the maritime workforce, and foster a favorable investment environment for the construction of modern maritime facilities and world-class academic institutions.
• The bill covers virtually all aspects of shipping and shipbuilding. It provides for the creation of a Maritime Security Trust Fund similar to those for highways and aviation; encourages U.S. cooperation with allies to meet shipping demands; and mandates that 100 percent of government cargoes be carried on U.S.-flagged vessels, up from today’s 50 percent.

The SHIPS Act also establishes a U.S. Strategic Commercial Fleet Program of 250 vessels, created through the acquisition of “commercially viable, militarily useful private vessels.” This fleet will serve “to meet national security requirements and maintain a U.S. presence in international commercial shipping.”

Funding for the Maritime Security Trust Fund will come from increased port fees on foreign vessels. The initial version of the bill included changes to the assessment of special ship and lighthouse fees, prohibiting their suspension for vessels owned or operated by any “foreign entity of concern,” registered in or recently connected to such a country. China falls under this definition. This language implied an additional $1 per net ton levy on Chinese vessels. The new version retains this language and goes even further — the Fund will be replenished through special tonnage and lighthouse taxes, port fees collected by the U.S. Trade Representative, and an additional levy on Chinese ships.

In the new version, a “foreign shipyard of concern” is defined as any shipyard owned or controlled by a foreign state of concern. Senator Mark Kelly, one of the bill’s authors, stated that this refers to shipyards owned by the China State Shipbuilding Corporation. However, starting in October 2027, other shipyards may be added to this list, making it likely that additional Chinese builders will be included.

The SHIPS Act introduces a “penalty tax” on Chinese vessels and operators, as well as on non-Chinese operators placing orders at foreign shipyards of concern, at a rate of $5 per ton. The penalty tax will be $3.50 per ton for non-Chinese owners or operators whose 25–49% of vessels are ordered from or delivered by foreign shipyards within 24 months of application.

A further penalty tax of $1.25 per ton will apply to vessels owned or operated by any entity whose 50% or more of ships were built or repaired at a shipyard of concern “at any time” within the three years preceding the application date.

An incentive package for enterprises experiencing labor shortages in the merchant marine and shipbuilding industries will include public service loan forgiveness and limited eligibility for educational assistance under the G.I. Bill.

The bill establishes a 33% investment tax credit for any taxpayer investments in constructing, converting, or rebuilding a qualified oceangoing vessel in the United States, and a 25% investment tax credit for investments in a qualified U.S. shipbuilding yard.

However, even such a powerful law (the SHIPS Act) to rescue American shipbuilding and shipping may not be enough, and political circles are already discussing a number of additional measures, which we will cover in the next article.