"We used to build ships better than anybody. We will again, very quickly." These were the bold pronouncements of President Donald Trump during a recent address to Congress, echoing his long-held ambition to resurrect America's once-mighty shipbuilding industry. His administration even formalized this commitment with a recent executive order aimed at "rebuilding the American shipbuilding industry." This seemingly singular focus on vessels stems from a fundamental understanding: naval power is inextricably linked to shipbuilding capacity. To revitalize the U.S. Navy, the ability to construct its own ships must first be restored. However, as a closer examination reveals, reversing the decades-long decline of American shipbuilding is a monumental undertaking fraught with historical baggage and economic realities.

A Fleeting Golden Age

President Trump's nostalgic vision of a shipbuilding powerhouse evokes a bygone era. Yet, the period when the United States truly dominated global shipbuilding is a distant memory, primarily confined to the tumultuous years of World War II. Between 1941 and 1945, American shipyards achieved an astonishing feat, churning out 2,710 Liberty ships, a class of mass-produced cargo vessels. This unprecedented output was largely driven by urgent orders from war-torn Europe, grappling with German U-boat attacks and a critical shortage of vessels. The Liberty ships became the workhorses of the Allied war effort, transporting vital supplies across the globe. During this brief period, the United States ascended to the top of the global shipbuilding hierarchy. It was a peak never to be repeated.

With the cessation of hostilities and the return to peacetime, the American shipbuilding industry rapidly contracted. Its wartime boom was an anomaly, fueled by extraordinary circumstances rather than inherent competitiveness. Even before the war, American shipbuilders struggled against European counterparts due to higher labor costs and steel prices, resulting in significantly more expensive vessels.

Crucially, American shipyards faced little pressure to innovate or reduce costs due to a lack of domestic competition. This sheltered environment was largely a consequence of the Merchant Marine Act of 1920, better known as the Jones Act, a piece of legislation enacted over a century ago that continues to cast a long shadow over the industry.

The Jones Act: A Century of Consequence

The Jones Act is a recurring character in any discussion about the current state of American shipbuilding. This highly protectionist maritime law mandates that any vessel transporting goods between U.S. ports must be: (1) built in the United States, (2) owned by U.S. citizens, and (3) crewed by at least 75% U.S. citizens. The first provision, requiring domestic construction for domestic trade, is the crux of the issue.

The rationale behind the Jones Act was, and remains, rooted in national security. In times of conflict, the ability to rapidly mobilize merchant ships as naval auxiliaries and draw upon a pool of American mariners is considered vital for projecting power and sustaining military operations far from home. The logic was that protecting the domestic shipbuilding industry was essential to ensuring this readily available fleet and workforce.

However, the practical consequences of the Jones Act have been far from its intended aims. The price of American-built commercial vessels has steadily inflated. Domestic shipping companies, with no option but to purchase these costlier American ships to operate within U.S. waters, absorbed these expenses. Protected from foreign competition, domestic shipyards had little incentive to control costs or innovate.

In the 1920s, American-built ships were already about 20% more expensive than their foreign counterparts. This price gap widened dramatically, reaching 30% in the 1930s and a staggering 100% by the 1950s. Today, American-built commercial vessels can cost up to four times the international market price.

Simultaneously, the manufacturing prowess of American shipyards atrophied. Shielded from the competitive pressures of the global market, they neglected advancements in shipbuilding techniques. A prime example is the "large block construction" method, which revolutionized shipbuilding during World War II, enabling the rapid assembly of Liberty ships by prefabricating large sections. After the war, as many U.S. shipyards closed, the adoption of this efficient technique waned in the remaining ones. There was simply no compelling economic reason to prioritize such productivity gains within the protected domestic market.

Ironically, this very technology was transferred to Japan by an American shipyard manager named Elmer L. Hann. Coupled with strategic government support, it fueled the meteoric rise of the Japanese shipbuilding industry. By 1956, Japan had surpassed even Great Britain, the long-reigning maritime power, to become the world's leading shipbuilding nation.

A Century of Unintended Consequences

The Jones Act ultimately fostered the very opposite of its intended goals. The American shipbuilding industry stagnated, ship prices soared, and the competitiveness of U.S. domestic maritime transport eroded.

The stark reality is reflected in the numbers. U.S. ship production has plummeted by 85% since the 1950s. In the 1970s, American shipyards accounted for a meager 5% of global ship construction (by gross tonnage). Today, that figure has dwindled to a barely perceptible 0.1%. In recent years, U.S. shipyards have produced only a handful (3-5) of commercial vessels annually, and there have been no significant exports of large American-built ships for decades.

The domestic shipping landscape has also suffered. Before World War II, approximately 400 vessels operated in U.S. coastwise trade. Now, fewer than 100 Jones Act-compliant ships remain, struggling to compete with more cost-effective trucking.

The repercussions extend beyond the shipbuilding and shipping sectors. Bob Gunter, a businessman operating a rum distillery in Hawaii called Koloa Rum, was astonished to discover that shipping a container from Hawaii to Los Angeles cost $5,000, while the subsequent international leg from Los Angeles to Sydney, Australia, was significantly cheaper at $1,900. The Jones Act, applying to domestic shipping between Hawaii and the mainland, was the culprit.

Similarly, the U.S. territory of Puerto Rico imports liquefied natural gas (LNG) from Nigeria rather than the continental United States because it is unable to secure Jones Act-compliant American vessels to transport the gas domestically.

Even the national security argument underpinning the Jones Act has proven flawed in practice. During the 1990-1991 Gulf War, the U.S. military was forced to charter 177 foreign-flagged vessels to transport military equipment to the Middle East due to a severe shortage of available American ships. In a particularly embarrassing episode, requests to use Soviet cargo ships were reportedly rejected twice.

Furthermore, Operation Desert Shield and Desert Storm required the rapid recruitment of 4,200 merchant mariners. These were not the young, readily available seafarers envisioned by the proponents of the Jones Act. Instead, the vast majority were retired, elderly former sailors, many in their 60s and 70s, with two octogenarians and even a 92-year-old among them, according to official U.S. military records.

While ships can be chartered from other nations in times of crisis, relying on foreign nationals to crew military supply vessels is a precarious proposition. The Jones Act, by linking the fortunes of the shipbuilding and shipping industries, has arguably weakened both. As a 2019 Cato Institute report aptly stated, "The Jones Act has relegated the U.S. shipbuilding industry to second-tier status. After 100 years of failure, a new approach is needed."

A Chasm in Capacity

Shipbuilding is fundamentally a labor-intensive industry requiring a large workforce. The shifting global dominance in shipbuilding – from the UK to Japan in the 1950s, then to South Korea in the 2000s, and subsequently to China in the 2010s – reflects this dynamic.

China formally designated shipbuilding as a strategic national industry in its 11th Five-Year Plan (2006-2010). Leveraging lower labor costs, competitive steel prices, and substantial government subsidies, the Chinese shipbuilding industry experienced explosive growth. China's global market share (by deadweight tonnage) surged from 18% in 2007 to 55.7% last year. In terms of new orders, China's dominance is even more pronounced, reaching 70% in the previous year. China's total shipbuilding capacity stands at a staggering 23 million deadweight tons, dwarfing the United States' paltry 100,000 deadweight tons – a 230-fold difference.

The shipbuilding industry is not an isolated entity. Constructing large vessels necessitates a robust ecosystem of supporting industries, including high-quality steel production, massive cranes, and marine engine manufacturing. It requires a vast heavy industrial infrastructure. For the United States to rebuild its shipbuilding capacity means relying on more expensive domestic steel and imported components and materials subject to tariffs. This is why Michael Tamvakis, a professor at City, University of London, characterizes the notion of making the U.S. shipbuilding industry "great again" as a "futile and enormously costly undertaking."

The size of the U.S. Navy fleet has halved since the end of the Cold War. In terms of the number of commissioned warships (including auxiliary vessels), the United States has already been surpassed by China, with 295 ships compared to China's 400. While the U.S. maintains a qualitative edge in aircraft carriers (11 vs. 3) and nuclear submarines (66 vs. 12), the numerical disparity is a growing concern.

Adding to the challenge, the existing U.S. fleet is aging. While 70% of Chinese warships were commissioned after 2010, three out of four American warships are more than 15 years old. Addressing this growing gap has been a recurring theme within the Navy for years, with concerns amplified by the potential for Chinese aggression towards Taiwan. The U.S. Navy recently unveiled a plan to expand its fleet to 381 ships by 2045, an ambitious target.

However, U.S. law prohibits the procurement of naval vessels from foreign shipyards (though the President can grant waivers). American shipyards are plagued by slow production rates and high costs. As Rear Admiral Fred, Principal Deputy Assistant Secretary of the Navy for Research, Development and Acquisition, testified before Congress, naval ship deliveries are facing delays of approximately one to four years, and costs continue to rise faster than inflation. The capacity and workforce simply do not exist within the U.S. to meet these ambitious shipbuilding goals.

This stark reality is driving the U.S. to look towards its allies, particularly South Korea's highly efficient shipbuilding industry. Legislation has already been introduced in the U.S. Congress to allow the construction of naval vessels in allied shipyards, and calls for the repeal of the Jones Act are gaining momentum.

However, significant opposition is expected from entrenched interests, including the Shipbuilders Council of America and major defense contractors like Huntington Ingalls Industries (the largest U.S. military shipbuilder) and General Dynamics (a U.S. submarine manufacturer). These deeply rooted stakeholders represent a formidable obstacle to any radical changes. Whether the Trump administration can bring about meaningful reform to the protectionist walls surrounding the U.S. shipbuilding industry remains to be seen. The path ahead is uncertain and likely arduous. Nevertheless, the potential opportunities for the South Korean shipbuilding industry are undeniably growing.

The renewed focus on the U.S. shipbuilding industry by President Trump is driven by the critical link between shipbuilding capacity and naval power, particularly in the face of a rising China. However, the industry's decline is deeply rooted in the unintended consequences of the Jones Act, a century-old protectionist law that stifled competition, inflated costs, and hindered technological advancement. As a result, the U.S. now possesses a minuscule share of global shipbuilding output and struggles to meet its own naval shipbuilding demands in terms of both speed and cost. This has led to a growing recognition of the need for alternative solutions, including potential collaboration with allied shipbuilding nations like South Korea and a re-evaluation of the long-standing Jones Act. The coming years will be crucial in determining whether the U.S. can overcome its self-inflicted wounds and truly revive its dormant shipbuilding capabilities.