A Shining City on the Sea: Rebuilding America’s Maritime Industry

China’s rise as a strategic adversary and maritime power has finally triggered much-needed introspection and shaken America out of a multigenerational hibernation. The U.S. maritime industrial base (MIB) faces a Chinese counterpart hundreds of times larger in both shipbuilding capacity and commercial orders. China’s penetration of U.S. ports through Xi Jinping’s “military-civil fusion” strategy—exploiting dual-use technologies such as smart cranes—gives the Chinese MIB an additional edge. Revitalizing America’s maritime industry to compete and win in a global economy saturated with nonmarket actors requires dramatic and rapid changes. Rather than chasing politically expedient solutions wrapped in nostalgia, we must look deeper into our past and further into our future to find the path to victory.

A successful U.S. maritime strategy must prioritize attracting capital and lowering regulatory burdens to amplify America’s technology and geography advantages. This new approach also requires shifting focus from often costly supply-side policy levers to demand-side development of the customers of the future. Rather than trying to catch up to the leading MIBs, this could include rethinking global and domestic mari­time supply chains and leapfrogging ahead by accelerating Amer­ican leadership in nascent advanced nuclear maritime applications, autonomy, and high-productivity greenfield shipyards of the future.

President Trump has made clear that the status quo that facilitated America’s maritime decline must cease immediately. We will not be able to legislate or fund our way out of this problem within the legacy maritime policy patchwork. Large-scale commercial production will require significant buy-in from markets and the private sector as well as political leadership. Although we cannot control the actions of our adversaries, we can mobilize to defend ourselves from their predatory policies. This will require using the weight of our economy to impose costs on them while cooperating with allies to rebuild American heavy industries. Rather than ever-more government palliative care, we must build a new American MIB that prioritizes world-class, durable com­mercial competitiveness. This is essential for both economic and security reasons. Our current maritime weakness is provocative. To deter war and become a twenty-first-century maritime apex predator, the United States must aspire to become a shining city on the sea. 

With only the faintest scintilla of commercial shipbuilding in its shadows, America’s naval industrial base has limped along for many decades, unmoored from Alfred Thayer Mahan’s vision of a robust merchant shipping and shipbuilding sector underpinning naval might. Consider that government contracts account for more than 95 percent of domestic blue-water shipbuilding revenue, and the Defense Department has begun turning abroad for ship acquisitions. America’s treatment of its MIB has devolved into a chronic inverse-Mahanian mess. A new course is needed to ensure access to the world’s oceans, sustain a wartime economy, develop self-reinforcing domestic supply chains, and build and maintain the fleet needed to, ideally, prevent and, if necessary, win a war in which the naval theater will likely prove decisive.

First Principles for Renewal

The rise and fall of great maritime powers is shaped by the customer of the future. There is a significant first-mover advantage to MIBs that correctly identify and foster new technology, high productivity, and continuous improvement—thereby helping craft the next growth mar­ket. Maritime ecosystems optimized for government contracts never truly thrive. When a nation’s MIB is overwhelmingly reliant on a government monopsony, the upper bound of growth and dynamism is quickly stunted by political whimsy that becomes self-reinforcing. In other words, the MIB adapts to its leading customer. When a shipyard’s goal is to attain government contracts, it becomes very good at attaining government contracts. When a shipyard’s goal is to build ships, it becomes very good at building ships, in turn attracting customers, domestic and foreign. By extension, nations that prioritize MIBs capable of developing competitive products and services that answer the needs of vast future markets achieve escape velocity from government depend­ence.

Given the boom-and-bust cycles of shipbuilding and maritime trade, national support still often plays a meaningful role in sustaining MIBs. To a greater degree than the dollar figure, the way such support is crafted, and to what end, has influence on the trajectory of a nation’s MIB evolution. Long-term, durable growth results from pur­posely orienting subsidies and supporting policies away from a government monopsony, toward the creation of competitive global market demand.

To envision a program of government support and identify the starting points for rebuilding, we must first revisit how our MIB fell into its chronically diminished state. The same factors that allowed the American MIB to thrive and dominate globally in the nineteenth centu­ry allowed the British and, later, Japanese and Korean MIBs to gain market dominance in the twentieth. In the past two decades, China has usurped this mantle of maritime industrial and logistical dominance, with much graver consequences for the free world. An effective Ameri­can strategic response today must internalize these fac­tors, building com­mercial competitiveness rather than confounding it. 

The Rise and Fall of the American MIB

The United States enjoyed nearly a century-long maritime rise after its founding. American shipping and shipbuilding thrived, supporting the young country’s strategic goals and commercial interests, buoyed by the continent’s vast resources and seafaring culture. In the Age of Sail, the United States innovated into dominance with a large, reliable, and fast-moving fleet backed by productive, cost-competitive domestic shipyards. Command of expansive domestic and global trade lanes generated self-reinforcing growth and spread American influence abroad. The early republic’s sleek and elegant clipper ships efficiently connected global trading markets, offering the fastest, most attractive option to shippers around the world. 

This early dominance ran into a wall at the confluence of the Civil War and the British innovation of steam propulsion and metal hulls. As war gave way to Reconstruction, American commercial shipowners began to see the writing on the wall. Those who had kept ships in the fight lost fleets and crews to battles. Those who had changed flags to preserve their ships in international commerce were confronted with new laws labeling them traitors for doing so and prohibiting return to the American flag. With a much smaller fleet and an MIB in denial about the inexorable evolution away from wood and sail, America lost its com­mercially dominant position. 

Entering the twentieth century, the United States was effectively one of many players in commercial shipping and shipbuilding. With some notable exceptions, Alfred Thayer Mahan’s contemporaneous writings were dis­missed domestically but embraced overseas. Kaiser Wilhelm II declared that he was not just reading Mahan’s The Influence of Sea Power upon History but “trying to learn it by heart.”¹

Germany’s unrestricted submarine warfare in World War I not only triggered American entry into the conflict but also illustrated how the American MIB had become woefully inadequate. An ensuing emergency government shipbuilding program resulted in what amounted to a federal takeover of the nation’s MIB. Although this flooded shipyard order books, most vessel construction was initiated after the signing of the Armistice.

With nearly half of the nation’s shipyards incapable of steelwork, many constituent skids were greased to assure mandated government procurement of small, obsolete wooden ships built for producibility rather than to meet wartime requirements. The U.S. Shipping Board (USSB), the government organization that owned and operated the resulting fleet and domestic MIB, became the world’s largest shipping entity. Despite some initial insulation from the pressures of global maritime trade, this government-owned fleet could not sustain operations competitively and was scrapped or sold off. Many shipyards were then shuttered. The Merchant Marine Act of 1920 was crafted in large part to handle the disposition of the resulting fleet, and the USSB was abolished. 

Following this regression, as global conflict raged once again in 1940, President Franklin Delano Roosevelt established the Emergency Ship­building Program to provide much-needed government funding for ship replenishment. The U.S. shipping and shipbuilding sector was still relatively small, however, and as it became more evident that the United States would be pulled into the war, the decision was made to enlist the broader national industrial base to raise the nation’s MIB capabilities. Focusing primarily on simple, low-cost, mass-producible cargo ships, American civilian industry rapidly coalesced to produce thousands of Liberty Ships and, later, hundreds of more capable Victory ships. This expanding MIB pioneered new approaches to shipbuilding, marshaling the expertise of heavy construction magnates, including Henry Kaiser, and a vast civilian workforce to build new shipyards rapidly and at scale. Innovations such as modular construction, large plate welding, and iterative materials science enabled improvements to shipyard productivity and vessel quality. America’s ability to assemble a large and capable MIB in a relatively short amount of time proved indispensable to the Allied victory. 

In the years that followed the war, however, this substantial American MIB was unable to evolve toward durable commercial competitiveness. Despite continued government support through so-called con­struction differential subsidies, by which the government funded up to 50 percent of the vessel’s price, American shipyards averaged only 3 percent of global commercial ship construction by the 1950s. Beset by nearly prohibitive operating expenses, U.S.-flag shipping likewise collapsed to a single-digit share of global trade. As the U.S.-flag fleet aged out and domestic shipyards shuttered, American shipowners increasingly shifted to modern, efficient, and lower-cost fleets operating under “flags of convenience,” such as those of Panama, Honduras, and Liberia, states which remained under effective U.S. control at the time. Unconstrained by prohibitively expensive American labor, these flag states allowed American owners to retain a meaningful stake in global maritime trade lanes. 

Amid the continued decline of the American MIB, U.S. planners were confronted with Soviet leader Nikita Khruschev’s 1957 challenge: “We declare war upon you—in the peaceful field of trade. . . . We are relentless in this, and it will prove the superiority of our system.” Strategic competition thus extended to the realms of trade and logistics in the Cold War, just as it does today, as the United States is belatedly recognizing. In a 1959 study on “Wartime Use of the Merchant Marine,” the National Academy of Sciences examined the American MIB, the global market, and the needed strategy. Considering all possible options to preserve, fortify, and expand American shipping and shipbuilding capacity to the required levels, the study concluded:

If the United States intends to preclude complete dependence on foreign controlled shipping for the maintenance of its military and commercial lifelines, the only realistic solution lies in a drastic improvement in cargo handling and ship operation efficiency, together with significant advances in future ship design and construction. The Maritime Administration’s continuing objective should be the development of a commercially competitive U.S. Merchant Marine requiring a minimum of subsidy. The Panel agrees that these advances are technologically feasible and can be commercially successful with minimum subsidy. To attain them, it is imperative that management and labor be brought together in acceptance of the value to the whole industry of mechanization and automation both on the ships and in the ocean terminals.²

As other countries’ maritime industries embraced this competitive focus, a preponderance of the American MIB continued to eschew them. By the 1980s, with relatively few customers remaining, American shipbuilding had nearly devolved to the “grey hull” monopsony in which the government was the sole customer. This transition was accelerated by the scale of government demand for expensive naval vessels throughout the Cold War, which dwarfed the market for lower-margin commercial ships. Meanwhile, the commercial shipping and shipbuilding industry straggled into the mid-1980s on the fifty-year-old Construction Differential Subsidy (CDS) and Operational Differential Subsidy (ODS) programs, which had provided a lifeline for minimal levels of business but no impetus to become truly competitive. President Ronald Reagan held a burial at sea for this remaining portion of tax­payer‑funded commercial shipbuilding by terminating these measures. 

America’s commercial shipbuilding capacity has since collapsed. In the past quarter century, a small handful of commercial shipyards have delivered a total of sixty-seven commercial ships, averaging two to three deliveries a year, solely to a threadbare domestic customer. Despite significant reliance on foreign components, materials, designs, and labor, the lack of scale, competition with higher-margin government contracts, and dramatically eroded productivity has resulted in ship pricing three to five times that of equivalent vessels built in Korean or Japanese yards. Rather than large block orders that justify capital investments, forced low-volume orders have become the best that this critical industry can hope for.

The Spirit of the Law

The dwindling of America’s shipbuilding capacities has threatened the fulfillment of time-honored maritime regulations, at least in spirit and perhaps also in letter. Section 27 of the Merchant Marine Act of 1920, known as the Jones Act, mandates that all maritime trade between the nation’s vast coastwise points is restricted to American-built, owned, and operated ships. The Act’s stated purpose, to provide for robust domes­tic supply chains and to expand American commercial shipbuilding capacity, remains as noble and necessary as at the time of its passage:

[I]t is necessary for the national defense and for the proper growth of its foreign and domestic commerce that the United States shall have a merchant marine of the best equipped and most suitable types of vessels sufficient to carry the greater portion of its com­merce and serve as a naval or military auxiliary in time of war or national emergency. . . and to do whatever may be necessary to develop and encourage the maintenance of such a merchant marine. . . .

Policies should be measured not by their stated intent but by their outcome. This is especially true in the case of laws trapped in silt for over a century. The law’s namesake author, Senator Wesley Jones, knew this and made clear that it must continually evolve and should never detract from the nation’s maritime trade capabilities. In his words, “There may be provision(s) in the act that ought not be there.”³

As the American MIB retreated from competition in global trade, it found solace in the backstop provided by the Jones Act’s protected domestic market. Following a century of policy inertia, however, this backstop has been eroded into near oblivion. Although there are many unpowered barges and smaller vessels in the domestic trades, the blue-water fleet—the growth and maintenance of which was a central purpose of the law—has hit rock bottom. Deprived of competitive forces and with an MIB that aggressively pivoted to higher-margin government ship construction, many of these protected Jones Act trade lanes simply died off, and demand collapsed. As the small remaining fleet aged out or priced out of American supply chains, latent demand became dormant demand. Eventually dormant demand disappeared entirely, vanquishing entire nationally critical supply chains.

The ensuing demand destruction of coastwise supply chains reorient­ed the nation’s internal trade geography to accommodate the absence of shipping. Road and rail saw accelerated uptake, becoming dominant even as they often proved to be less efficient. The negative feedback loop caused by such a destructive dynamic eliminated entire heavy industries that once provided countless blue-collar jobs. Interior states have not been immune, as these hinterlands are highly dependent on domestic supply-chain connectivity with trade that takes place in coastal markets. Starved of the abundant waterborne commerce readily available abroad, an array of transportation-intensive manufacturing that once thrived in America suffered from immense capital flight.

Killing off these supply chains reduced demand for domestically built ships and coastal trade infrastructure, in turn accelerating the gentrification of the American waterfront. Without cargo traffic and without customers, waterfront geography became more attractive as a destination for luxury real estate development than for strategic industrial capacity. Domestic trade and supported industries gave way to imports of higher-value goods from abroad, while America’s exports decomplexified to favor primary goods and commodities that are far less dependent on complex domestic maritime supply chains. This cascading deindustrialization has served the interests of America’s adversaries and must be accounted for in the development of twenty-first-century American maritime policy.

Despite being the sole buyer of domestically built blue-water ships, blue-water Jones Act carriers have in some ways become hostile custom­ers. A quick review of SEC filings or investor calls reveals a strong bias against building new ships and expanding trade lane capacity at (almost) any cost.⁴

Where the numbers work, retired Jones Act ships are sometimes replaced by smaller, less capable, and less efficient (but cheaper to build and operate) vessels known as articulated tug barges (ATBs). ATBs are superior to conventional tug and barge combinations but far less effi­cient and capable than self-propelled ships. These tugs also eliminate the military utility and sealift-qualified mariner billets of self-propelled ships. In other words, the very dual-use capability that is supposed to justify having this protected market is effectively undermined.

The Jones Act has become the politically immutable nucleus of various “supporting” policies and lobbying organizations orbiting the American MIB. The problem is not so much the law itself (in some senses, it may not have been protectionist enough) but rather the almost religious adherence to its stasis and the accompanying misinformation and corruption that have plagued the MIB as a result. This unfortunate system may generate more jobs for lawyers than for blue-water shipbuilders or sealift-qualified mariners. Rather than protecting the sector by promoting growth and prosperity, the Jones Act has become political fentanyl. Anytime interest in modernization arises, the Jones Act lobbies quickly circle the wagons to fend off even constructive challenges to the status quo.

Today, the nature of U.S. steel imports reveals how the decline of maritime capabilities has contributed to deindustrialization. The United States is the world’s leading exporter of scrap metal by a massive margin, and yet we are a net importer of steel. As nearly twenty million tons of scrap metal congeal in American ports, our coastal mini-mills cannot exploit domestic sources of this commodity for lack of Jones Act–qualified ships to transport it. In fact, there is not one single bulk carrier in the Jones Act fleet. The cargo simply can’t return the margins needed to compensate for the massive capital and operational expenses. So, rather than connecting these domestic coastal supply chains, America is relegated to shipping scrap metal for pennies on the dollar to Turkey and China,⁵ which then reinforce their own heavy industries to build ships, shipyards, and value-enhancing infrastructure. Meanwhile, the Jones Act restrictions not only pulverize U.S. supply chains but also deprive American shipyards of domestically produced steel.

The economic realities of our nearly extinct commercial blue-water MIB nonetheless compel the U.S. government to violate the Jones Act’s spirit. The Department of Defense today is turning to the second-hand, foreign-built market to purchase auxiliary sealift ships. Procuring domestically has become untenable: there are only three remaining domestic commercial yards capable of producing large blue-water vessels, and these yards have extremely limited build capacity, with prices twenty-six times the cost of foreign vessels.⁶ In March 2025, naval analyst Ron O’Rourke testified before Congress that, at this point, any increases in domestic commercial shipbuilding will come at the expense of naval shipbuilding.⁷ Competing for overlapping resources now requires an unfortunate triage that cannot be resolved unilaterally.

This should be a wakeup call. The Chinese government is fully aware of the MIB’s depleted state, a reality that compromises the credibility of American deterrence, and is counting on politics as usual to obstruct any strategy of renewal. Authoritative Chinese publications have tracked the decline of U.S. shipyards and relevant personnel ranks since at least 2010. In that year, the Chinese translation of a U.S. Naval Sea Systems Command publication on “reform of the U.S. ship maintenance support system” featured text and charts from the original showing American maintenance support layout and staffing levels across U.S. shipyards.⁸ The charts depicted an already lean workforce that contracted further over the ensuing decade and a half.

Fast forward to the present: a publication from a research institute of the state-owned China State Shipbuilding Corporation describes the U.S. MIB as being “in terminal decline,” with the U.S. Navy in turn suffering from dependence on its “strategic competitor” for supplies and finding its ships increasingly expensive to build, as the commercial industry faces a shortage of talent and workers.⁹ Thus, our hollowed-out MIB is exposed to the world, recognized by allies and adversaries alike. 

Nonmarket Actors in the Lead

A healthy maritime industrial base features many positive feedback loops. While military ships are very different from commercial ships, in lean years for commercial shipbuilding, civilian shipyards can be con­verted to produce some classes of military vessels, a dress rehearsal for wartime conversions. This appears to be what happened in China in the 2010s, when the People’s Liberation Army Navy (PLAN) produced, on average, more than ten new surface ships annually after the market for commercial ships contracted following the Global Financial Crisis. But China was only able to surge its naval shipbuilding because it spent the previous decade planning and acting to position its MIB for commercial dominance.

In 2002, Zhu Rongji, then premier, set a goal of becoming the world’s number-one shipbuilder by 2015. At the time, the PRC accounted for only a single-digit percentage of gross tonnage built globally, but Chi­nese Communist Party (CCP) elites identified shipbuilding as a stra­tegi­cally important sector. In a report to China’s influential National Development and Reform Commission, its Vice Chairman Zhang Guobao outlined the downstream benefits of building a domestic maritime industry:

The development of shipbuilding has a great visible effect on driving economic growth and employment, unlike some small commodities. . . . Shipbuilding is both a technology-intensive in­dustry and a labor-intensive industry . . . [It] is a traditional industry that requires the backing of the steel industry and many electromechanical supporting industries. . . . Shipbuilding [labor], raw materials such as steel, and supporting electromechanical products each account for about [one-third of] the cost of a ship. . . . The development of the shipbuilding industry can drive the development of the supporting electromechanical equipment manufacturing industry.¹⁰

Just after the PRC’s accession to the World Trade Organization (WTO), as China was cementing its role as the world’s factory, Chinese strategists homed in on the country’s shipbuilding advantages and the ancillary economic and military benefits of MIB technology. This analy­sis followed the work of Chinese military strategists, who envisioned a seafaring future for the PRC as early as 1987. In that year, PLA Colonel Xu Guangyu wrote about how, as China’s economy and appetites grew, the country would need to become a maritime power to access markets and resources by sea.¹¹ Roughly concurrently, PLA General Liu Huaqing was charting a course for the PLAN to dominate the first island chain by 2000, including waters out to the Japanese archipelago, around Taiwan, and through the South China Sea. His plan sought mastery over the second island chain, which extends out to Guam, by 2020. Consistent with this rough schedule, in 2004, Hu Jintao, then CCP general secretary, assigned the PLA “new historical missions” involving operations in seas beyond the PLAN’s traditional coastal confinement.¹²

The economic and military cases for maritime dominance came together in the CCP’s fear of blockades. Where Washington has long divorced peacetime economic matters from wartime military activity, Beijing sees these spheres as integrally connected. The greatest threat a CCP strategic planner faced circa 2005 was losing access to the high-technology inputs on which China’s industries depended,¹³ and given the prevalence of encirclements, sieges, and embargoes in the Party’s history, this threat loomed large. 

 In line with Zhu’s 2002 goal and Hu’s 2004 missions, the CCP designated shipbuilding a strategic industry in its Eleventh National Five‑Year Economic Plan for the years 2006 through 2010 and promulgated a subsidiary Medium- and Long-Term Plan for the Development of the Shipbuilding Industry (2006–15), along with some $11 billion per year in subsidies. Most of these were delivered in the form of “entry subsidies,” including free waterfront land, fast-tracked free permitting, and productivity-oriented capital shipyard infrastructure. The economist Myrta Kalouptsidi estimates that the CCP spent $90 billion between 2006 and 2013 to build out China’s shipbuilding capacity, turning it into the source of more than half of the world’s gross tonnage built, and in the process decimating Japan and South Korea’s respective order books.

Furthermore, 2013 was the first full year of General Secretary Xi Jinping’s tenure, which has been marked by a shift toward a more aggressive foreign policy, both in the region and beyond it. This is not a coincidence. Xi assumed office as the beneficiary of policies that put the CCP in the driver’s seat vis-à-vis its neighbors and its neighbors’ ally, the United States. If China had not succeeded in becoming the world’s largest shipbuilder, and was not well on its way to boasting more ships than the U.S. Navy, it is hard to imagine that Xi would have felt comfortable intensifying pressure on Japan’s claim to the Senkaku Islands, building and fortifying artificial islands in disputed areas of the South China Sea, or taking over Hong Kong.¹⁴ In hindsight, the decade leading up to Xi’s accession was critical to the CCP’s transformation from insecurity to confidence. 

The last decade has seen China position itself to threaten freedom of navigation, and with it, prosperity and peace—goals the U.S. Navy was long able to secure. But the continued atrophy of the American MIB, coinciding with the rise of China’s, has already changed this. The CCP is increasingly challenging U.S. command of the seas by changing facts on the water, threatening American allies and partners such as Japan, Australia, the Philippines, and Taiwan, overfishing globally, and building up its military to repel U.S. forces.

Given the PRC’s greater dependence relative to the United States on seaborne resource flows and access to world markets, if the United States were to reinvigorate its influence over maritime commerce and its shipbuilding, this could help reduce the likelihood of further Chinese aggression. The U.S. Navy’s legacy bases across strategic locations from Western Asia and the Indian Ocean to the South Pacific provide a platform from which to exert such influence.

In restoring its MIB, the United States has the benefit of a deep entrepreneurial and technological talent pool that could develop leap­frog solutions such as autonomy, advanced nuclear maritime energy, and (perhaps) additive manufacturing. The United States has not fully exploited its resource endowment, however, due to a burdensome regulatory regime that has made it cheaper to import raw materials. Pricing in the security, environmental, and ethical risks of relying on China for these materials, along with deregulating domestically, should help to put American providers back in business.

Additionally, the United States retains allies in East Asia (and Europe) who know how to build ships competitively and at scale, and whose MIBs have been under attack by China as well. The United States also benefits from an abundance of (dramatically underused) coastline and internal waterways that could be exploited as part of a restored maritime industrial base. President Trump’s concept of “Freedom Cities,” unveiled at the start of his presidential campaign in 2023, provides a blueprint of how this could work.

Several benchmarks could be used to measure America’s progress in recovering its long lost Mahanian roots. The wildly successful company SpaceX, which builds “Starships” for navigating across the heavenly seas, has set an agenda to build roughly one such craft per day by 2028. This is possible because SpaceX has both a significant commercial and government order book. Needless to say, U.S. shipbuilders do not enjoy such a demand-side cushion. And given the glass house created by a small oligopoly of blue-water Jones Act shipowners, whose commercial objective is zero expansion of domestic tradelanes capacity, American yards are pitted against a hostile customer that avoids purchasing their product unless absolutely necessary. Such is the rot in the current configuration.

The Risks of Business as Usual

The status quo features unacceptable risks in the form of American dependence on, and penetration by, the Chinese Communist Party. If the United States were serious about its MIB and its security, it would move swiftly to address some unfinished business that the Biden administration initiated but was unable to complete.

For instance, a 2024 executive order warned that 80 percent of the ship-to-shore cranes at America’s ports are made by a Chinese company—Shanghai Zhenhua Heavy Industries Company (ZPMC)—and known to be subject to Chinese monitoring and remote control. But the White House’s remedy was to announce that it would spend $20 billion over the next five years to replace the Chinese cranes with alternatives made by the U.S. subsidiary of a Japanese company.¹⁵ Five years is a long time to wait, and $20 billion is a lot to spend, especially when one considers that the problem is not the cranes themselves but the smart systems (i.e., industrial controls, diagnostics, cameras, internet connectivity nodes, and software) within and accompanying them. Why not move much more quickly and economically to address those targets? That is, remove and replace only the problematic subcomponents and ancillary connections while leaving the structural hardware intact. Resolving this national travesty by “freedom-flashing” the firmware and service providers would cost millions rather than billions. The rest of the planned funds could be repurposed to seed greenfield investments in start-ups supporting a U.S. MIB renaissance focused on leveraging American technology to attain commercial competitiveness. 

The Biden administration also initiated a review by the U.S. Trade Representative (USTR), under Section 301 of the Trade Act of 1974, of whether China has hurt U.S. commerce by engaging in unfair trade practices. Concluded in mid-January, just before President Trump’s inauguration, the review found that “China’s actions have in fact been unreasonable and burden and restrict U.S. commerce.”¹⁶ The report specifically accuses China of “policies that unfairly depress costs or provide advantage,”¹⁷ including “the use of forced or compulsory labor” and “non-market excess capacity in inputs such as steel.” This result empowers the USTR, under the president’s direction, to use measures “within the President’s power with respect to trade in goods or services, or with respect to any other area of pertinent relations with the foreign country” to eliminate China’s unfair practices.

We can learn from Chinese entities’ responses to USTR requests for comments during its investigation. They consistently denied any role in the decline of U.S. shipbuilding (contrary to the USTR’s conclusion), while threatening that any remedial action would “backfire” against the United States by imposing costs on U.S. consumers, exporters, smaller ports, etc. At the same time, they depicted China as a friendly and cooperative partner. Call it the “Fatal Attraction” school of diplomacy.

Chinese MIB operators’ boasts about their subnational relationships in the United States should also have raised flags. For instance, a submis­sion from the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (cccme) referred to its:

[L]ong-standing and friendly cooperative relations with relevant U.S. government agencies and social institutions, such as the United States Trade and Development Agency (TDA), the Cali­fornia Governor’s Office of Business and Economic Development (GO-Biz), the Michigan Economic Development Corporation (MEDC), the Bay Area Council, the Los Angeles Regional Export Council (LARExC), the Milken Institute, as well as the American Chamber of Commerce in China (AmCham China).¹⁸

Cccme is not registered as a foreign agent with the Justice Department, but it is participating in U.S. policy deliberations as a “national and non-profit social organization.” Meanwhile, its party secretary plays host at international forums in China organized by the Ministry of Commerce to promote Chinese business interests.¹⁹

In addition to these long-standing problems, there are threats that the United States has not even begun to address, or that the last administration exacerbated rather than countered. These include letting Chinese representatives dominate standard-setting bodies and then shackling U.S. shipbuilding to Beijing’s preferred energy efficiency requirements.²⁰ Mortgaging America’s maritime future to made-in-China “green” solu­tions is neither environmentally nor strategically sound. 

Another particularly egregious example is the pattern of American shipowner preference for and reliance on Chinese state-owned shipyards for maintenance of Jones Act and other U.S.-flag ships. Cosco Nantong Shipping Shipyard counts Jones Act companies as reliable, lucrative customers. Because of the prohibitive expense of fleet recapitalization in domestic shipyards, Jones Act carriers routinely choose to conduct major overhauls and service-life extensions for obsolescent vessels, and they turn to China’s cheap but capable state-owned shipyards to perform this work.²¹ Ships that would otherwise have been scrapped due to age and decrepitude instead undergo overhauls so extensive that they sometimes exceed the value of newbuilds in allied shipyards. Since the cost of this annual work can reach the hundreds of millions of dollars, it is likely that these Jones Act carriers in some years contribute more to the Chinese MIB than they do to the American MIB.

For the privilege of paying Chinese shipyards, Jones Act companies risk introducing Chinese signals intelligence mon­itoring or sabotage capabilities into American vessels. Not to mention the fact that placing American merchant mariners aboard potential auxiliary sealift assets—sometimes for months at a time under an adversary’s control—is a dis­service to the nation. While the draft ships for America Act increases the existing tariff on foreign shipyard improvements, the correct amount of permissible work in adversary shipyards is zero. Pouring American capital into China’s MIB while throwing galas and paying for high-end lobbying with the savings to prevent competition and evolution is shameful.

Although the inefficiency and political indolence that have bankrupted U.S. shipbuilding have many fathers, maritime groups backed by Chinese money are an underappreciated problem. U.S. federal and state governments have only recently begun to recognize and counter CCP subnational interference, which the Party calls “united front work.” In 2020, during the first Trump administration, the State Department issued a warning, and this was followed by a 2022 publication from the Biden administration’s National Counterintelligence and Security Cen­ter. Both documents highlight the insidious role of “sister city” agree­ments, through which Chinese-intelligence-linked united front bodies seek to co-opt and corrupt unsuspecting American local leaders. But there has been no warning about the maritime complement of these activities, i.e., “friendship port” agreements. 

The first Chinese investment in a U.S. port was in 2001 at the Port of Los Angeles, which has since signed four more agreements with Chinese ports.²² Most recently, the Port of Los Angeles celebrated the twentieth anniversary of its friendship port connection to the Shanghai Municipal Transportation Commission earlier this year.²³ The Shanghai Municipal Transportation Commission is a CCP-permeated body, complete with an executive-level Communist Party Committee, Social Propaganda Department, and CCP Youth League organ. What appears to be a local institution is, therefore, actually a national one. By contrast, the Port of Los Angeles is a subunit of the city of Los Angeles.

Aside from the Chinese penetration, the rot America faces on the home front is perhaps most evident in the long-term evisceration of our critical domestic maritime supply chains. The fault for this lies with Washington, not Beijing. As a result of a century of unmitigated demand destruction, the blue-water Jones Act fleet’s size and composition reflects a retreat into the nation’s most inelastic supply chains, or those that exist regardless of price. In other words, the only domestic trade that can move aboard these nominally American—but, as mentioned, often Chinese maintained and overhauled—ships is the trade that has no alternative and must move at any cost. Today, despite our country’s incredible maritime geography, there are only about ninety ships globally that are permitted to connect U.S. oceangoing supply chains. This includes approximately twenty relatively small containerships in noncontiguous domestic trade lanes—such as those with Hawaii, Alaska, and Puerto Rico that have no terrestrial alternative—and a balance of the fleet composed of product tankers that have a hammerlock on various internal energy trade lanes.

The retreat into these no-fail supply chains has the unfortunate impact of eliminating ships from auxiliary sealift availability in time of war. Supply chains that have become brittle for lack of a fleet but that must persist during a wartime economy cannot support auxiliary sealift service. Scarcity thus not only deindustrializes the United States but deprives it of the Mahanian defense in depth envisioned by the Jones Act’s authors. As a result, and despite rhetoric to the contrary, the Defense Department no longer presumes a meaningful contribution from the Jones Act fleet for wartime strategic mobility.

While an extremely vocal Jones Act lobby is quick to claim that the fleet is “right-sized,” these claims obscure the difference between blue-water ships and smaller vessels, such as unpowered barges. This dynamic has locked out the abundant, efficient, low-cost supply chains readily available to America’s competitors.

Cooperation with allies could dramatically accelerate the construction of domestic waterborne freight capacity needed by America’s vibrant economy. This can be done in a manner that does no harm to what little we have left, while unlocking the vast productive capacity of America’s broader industrial base. Rather than continuing the long-standing retreat from global competition and protecting this critical industry into oblivion, American policy should elevate the MIB as an instrument of national power and arm it with every reasonable tool to compete and win. Reality and urgency do not allow for continued tweaks on the margins. Instead, a more comprehensive plan is called for. Step one is to confront the political pathologies that have left America all but denuded of an MIB.

A Competitive Approach to Rebuilding the American MIB

The Trump administration’s creation of a maritime industrial capacity team within the Executive Office of the President and the introduction of a sprawling bipartisan ships for America Act reveal Washington’s growing awareness of the crisis. While this is an excellent start, the historical lessons must not be lost. Whereas the previous buildups of the American MIB were crafted as wartime emergency programs that died off when government demand subsided, we have the opportunity today to reorient the MIB for durable commercial competitiveness in preparation for the next defense emergency. This will require looking to the future and leading the development of a competitive MIB that attracts and grows a global customer base. The agenda for maritime renewal can be divided into three broad categories: Jones Act fulfillment and related regulatory reforms, personnel and governmental reforms, and supporting and accelerating innovation.

A Jones Act modernization strategy should prioritize American jobs, block Chinese access, and impel a dramatic domestic modal shift to waterborne freight, connecting our own internal supply chains rather than stifling them. Currently, the nation cannot connect vital supply chains at scale due to a perpetual lack of Jones Act–qualified blue-water ships. The United States instead exports strategic commodities to competitors at low prices, often importing the same processed commodities at higher prices or finished products that could otherwise be manufactured domestically. Modernization could entail allied-only sup­port to rapidly build up essential domestic maritime supply chains. In return for access to these completely dormant but valuable coastwise trade lanes (which do not in any way detract from existing Jones Act carrier market power), policy could require a portion of crew billets reserved for American merchant mariners and a portion of the fleet repair and refit work preserved for American shipyards. Such a policy could be accompanied by the longer-term requirement that a percentage of the admitted fleet be built domestically and require escrow of the related funds before issuance of these allied coastwise endorsements. This would facilitate urgent American reindustrialization while generat­ing commercial demand for its MIB.

Preventing Americans from trading with one another under the status quo stunts entire American industries, such as steel reprocessing, that should be thriving. Ending these “self-embargoes” will drive down imports and reinforce American manufacturing independence.

To this end, the secretary of commerce, in consultation with the Department of Energy, Department of Interior, and Small Business Administration, should identify domestic supply chains that are critical to national production capabilities but cannot function for lack of Jones Act ships. This includes American scrap metal that should move to America’s coastal mini-mills, domestic LNG and LPG, with no domes­tic geographic restrictions, agricultural commodities, lumber, graphite, and many other valuable strategic commodities that are produced in America.

A national maritime reindustrialization program should integrate American efforts with the allied shipbuilding industrial base but do so in a way that concurrently builds and reinforces our own ailing MIB. The United States can contribute to saving the allied MIB from Chinese displacement in return for strategic assistance in rebuilding our own. Such a strategy should concentrate the first wave of MIB reconstruction on dual-use shipyard infrastructure, with graving docks, overhead lift capability, and resilient energy grids that can readily pivot to wartime support. Such investment can provide defense in depth to the integrated allied MIB by growing critical shipyard capacity outside of adversary range-rings.

Another area requiring major reform is cargo preference, which refers to the government-mandated use of U.S.-flag ships for certain cargo. Whereas this makes absolute sense for the transportation of military cargo, absent continuous full-offset subsidization, cargo prefer­ence should be thought of as a tax. Smart policy taxes things we want less of, not things we want more of.²⁴ Instead of penalizing critical American exports, such as the export of LNG, we should apply cargo preference to disfavored imports, such as Chinese imports.

Beyond the tariffs, the United States could penalize the CCP’s predatory MIB policies by requiring that a portion of any residual Chinese exports be carried aboard American ships. Rather than creating jobs for Chinese mariners and shipbuilders, the price of entry should be creating direly needed jobs for America’s mariners and shipbuilders. In addition to increasing demand for American merchant mariners and adding ships to the U.S. flag, this grows a durable fleet of U.S.-flag commercial ships in the Indo-Pacific region. Taking a page out of the Chinese playbook, this policy would help mitigate America’s strategic disadvantage in low-cost strategic mobility and capacity.

Current maritime policy does not reflect the underlying imperative that the United States must work toward slowing China’s maritime expansion rather than continuing to subsidizing it. The federal government should start by prohibiting any and all American use of the Chinese MIB. Jones Act carriers, other U.S.-flag carriers, and American shipowners must cease pouring American capital into China’s shipbuilding sector. In addition to supporting Beijing’s MIB dominance, this provides a significant intelligence vulnerability and should be prohibited without delay.

There are many other policy levers to imagine. For example, overseas reconstruction efforts supported by American aid should use American ships. Putative efforts to reconstruct Ukraine or Gaza will require vast logistics, including fleets of ships such as bulkers and tankers, which should not be produced in China and can be produced in American shipyards. These types of vessels are simple, highly produceable, and vitally important in global logistics. This could also include more complex vessels such as heavy-lift ships, which are highly sought after strategic assets.

Rebuilding the MIB also requires confronting the substantial work­force challenge. As American shipping and shipbuilding capacity has atrophied, so too has much of the expertise and cultural memory. Much needs to be done to restore that lost human capital and to revive a proud seafaring heritage.

In order to expand the merchant marine, any policy measure must elevate the stature of the profession and fortify the strategic capability of this vital workforce. For those mariners who are likely to be called upon to sail into harm’s way, such measures could include eliminating income tax on underway earnings to align with global practices; providing tax credits to offset licensing and certification expenses; providing joint military interoperability training for communications and convoy oper­ations; opening VA services and benefits to merchant mariners serving in contested operations; formalizing auxiliary sealift mobilization readiness status with a modern, single-point notification and contact-assurance system; and identifying and eliminating bottlenecks in Coast Guard credentialing while restoring “hawsepiping” for mariners seeking cre­dentialing as officers. It would likewise be prudent to elevate the national influence of our most experienced merchant mariners by recruiting them to serve as policymakers in the executive branch, includ­ing at the White House and across the interagency process. Finally, the federal government can authorize fully funded joint professional military education billets for merchant mariners at the nation’s war colleges.

The American university system produces fewer than one hundred naval architects annually. With so few ship designers, the MIB is heavily reliant on foreign expertise for this critical element, and domestic innovation is stifled. Using the Fulbright Scholarship model, the Maritime Administration could administer scholarships for aspiring American naval architects to learn at leading allied naval architecture and marine engineering programs and throughout the top allied shipyards abroad. Such a program could be extended to the skilled-trades within the shipbuilding workforce as well. Not only will this investment in the next generation of American maritime professionals provide essential technical learning, but this cross pollination will enable lifelong friendships that will be critical in challenging times.

The U.S. Coast Guard is an overlooked branch of the armed forces but one that should now play a prominent role in any attempt to redefine and expand American MIB competitiveness. The USCG is the only branch of the armed forces without a civilian service secretary. Without a dedicated senior civilian political appointee to ensure this strategically vital branch is at all times manned, trained, equipped, and ready for the fight, bureaucratic inertia in the flag corps and senior executive service ranks often paralyzes or precludes strategic decisions. This damages national readiness, and because the USCG also regulates the MIB, the resulting glacial pace of certifications, licensing, and innovation serve as an anchor holding back urgently needed reforms. Congress and the executive should work together to establish the office of a civilian service secretary of the U.S. Coast Guard.

The federal government could also modernize policy related to the Effective U.S. Control Fleet (EUSC). Although U.S.-flagged and U.S.-built ships are rare, thousands of blue-water ships across the global fleet are owned by American citizens. Laws on the books allow wartime access to this vast, globally competitive fleet, based on certain combinations of flag state registry and ownership. Attempts to gain any concrete information on this shadow capacity, even from the U.S. government itself, often result in shoulder shrugs. The federal government should determine clearly what these laws mean today and how to ensure access: it should work out deals with American shipowners to incentivize the necessary actions and update laws and regulations accordingly.

This starts with easing tax burdens. For U.S.-flag carriers, legislators could enact the world’s lowest tonnage tax, which would do much to streamline tax compliance. For shipyards, policymakers could extend the most favorable terms for demonstrably American ownership. And the tax code could also be made to incentivize allied investment pinned to competitiveness-enhancing activities, such as American workforce pipeline development through cross-pollination with leading shipbuilding nations.

One option for achieving this might be a “U.S.-Flag Freedom Credit,” or a tariff rebate for allied trade that employs U.S.-flag ships. Tariffs can be used to increase demand for the American maritime industrial base. Even a nominal reduction can quickly offset the U.S.-flag operating expense premium. These incentives for good actors can be applied to craft a proper dual-use fleet composition. For example, a five-thousand-car “roll-on/roll-off” carrier might carry $200 million of cargo. The current annual premium for a U.S.-flag ship is about $10 million. Therefore, two deliveries aboard a newly added U.S.-flag carrier that receive a 2.5 percent tariff rebate would offset the operating differential between U.S and foreign carriers. The credit could be doubled for U.S.-built ships, providing a powerful incentive to add American-built ships back into global trade, which will be a long-term challenge.

Finally, both policy reforms and the upgrading of personnel must work in tandem with the third and final goal, sparking a resurgence of maritime innovation. Seventy years ago, Admiral Hyman Rickover’s visionary leadership saw nuclear maritime propulsion from an imaginative idea to an operational USS Nautilus in only four years. The same year the Nautilus was launched, President Eisenhower commissioned a bold plan to demonstrate to the world the civilian potential of American nuclear technology through the Atoms for Peace initiative, delivering the Merchant Nuclear Ship Savannah only five years later. 

Recalling the lessons of the Eisenhower administration, President Trump and Congress should work with American technologists to commission an NS Savannah of 2030. The United States must take great care to avoid Chinese capture of such breakthroughs in civilian and dual‑use technologies. Like many of their Cold War–era contemporaries, Admiral Rickover and President Eisenhower understood the impor­tance of protecting American nuclear innovation. For Rickover, this meant secrecy, and for Eisenhower, investments in counterintelligence.

Increased investment in U.S. advanced nuclear technology could provide an avenue for achieving an advantage in the nation’s maritime competitiveness. The United States is still home to the world’s leading advanced reactor developers, national labs, technologists, and entrepreneurs, and has a distinguished history of creating, fostering, and building the world’s most capable nuclear navy.

The American innovation ecosystem can be redirected to leverage rapid development cycles: this can be done through a thoughtful stream­lining of licensing and certifications to build dominance in maritime energy technology markets. Vast spoils will accrue to a U.S.-flag fleet that can operate at faster speeds and without the constraints of refueling infrastructure, immune to the inverse relationship between fleet throughput and fuel prices. In turn, a nuclear-powered maritime sector could unlock advancements in still-nascent or hypothetical industries, such as offshore manufacturing, computational processing, large-scale vertical farming, space operations, seabed mining, and many other commercial and dual-use applications.

For example, a civil nuclear maritime industry could provide a steady demand anchor for a domestic high-assay low-enriched uranium fuel production industry, which benefits advanced reactor development broadly. This would galvanize investment in and rapid evolution of the American MIB, while reinforcing the nation’s domestic nuclear fuel production capabilities and thwarting adversary domination of yet another critical industry.

Pouring capital into high-productivity greenfield shipyards of the future, operating new, advanced U.S.-flag ships, generating the American MIB workforce of tomorrow, developing and producing the needed supporting American maritime technology, and making dramatic improvements to the current MIB are all strategic investments that should be rewarded with long-term, self-reinforcing economic incentives.

President Trump’s proposal to build new “Freedom Cities,” though not yet a focus of his second administration, presents an appealing model for building new maritime industrial centers.²⁵ Many relatively deindustrialized American cities, from Baltimore and Cincinnati to Rochester and St. Louis would make excellent candidates as target regions on which to focus the flow of strategic investment in a period of MIB revitalization: the same goes for the postindustrial areas around the Great Lakes and their tributaries.

The administration might also identify and foster multiple strategically logical, tax-free maritime opportunity zones. Federal policymakers can work with states to provide in-kind entry subsidies via public-private partnerships on procurement and fast-tracked permitting for development of greenfield shipyards of the future. The goal would be the clustering together of complementary elements, such as reliable low-cost American energy (including advanced small modular reactors), housing, training centers, open spaces, and robust family infrastructure.

It is within the power of Congress to enact technologically focused competitive grant programs and tax incentives for improving and building off of America’s small-vessel MIB competitiveness. An annual Maritime X-Prize program could incentivize private capital to create innovative vessels. America is not a shipbuilder (yet), but it is an excellent boat builder. Our policymakers must not leave this critical component of the MIB behind. Policy should focus on embracing our comparative advantage in producing smaller vessels across multiple markets, using tax and regulatory incentives to induce entrepreneurs and investors to pour capital into growing this advantage.

Even Red Left Port

As the United States embarks on its return to shipbuilding, it will have to navigate between the Scylla of government coddling and the Charybdis of nonmarket opponents. The goal is to rapidly increase competitiveness, which will pay dividends economically and in security terms.

This is the only way to escape the headwinds we have faced since China joined the World Trade Organization in 2001 and used mercantilism and military-civil fusion to turbocharge its own MIB at the expense of our own and that of our allies. It is no accident that average U.S. growth this century has been under 2 percent annually, well below the historical average of over 3 percent during the twentieth century (despite the Great Depression). It is also no accident that the same period witnessed the erosion of the U.S. lead in advanced technology, along with increasing dependence on our primary foreign adversary for critical inputs.

Some will say it is too late: We are too exposed and dependent. Any action to insulate the U.S. MIB from Chinese malfeasance will provoke Beijing in a sphere where China has escalation dominance. Others say we risk becoming like the CCP if the U.S. government acts to revive our MIB. None of this is true. It is the counsel of despair and a recipe for unacceptable passivity.

Taking stock of America’s significant residual strengths and recalling the fundamental responsibilities of any administration worthy of its au­thority lead to a different conclusion. America can turn this around, fulfill our maritime potential, and build a commercially competitive maritime industrial base tailored to the customer of the future. This revolution must begin today.

This article originally appeared in American Affairs Volume IX, Number 2 (Summer 2025): 81–104.

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Notes