Targeted action by Washington against Chinese shipbuilders in the waning days of Joe Biden’s presidency could offer a slight boost to South Korean rivals, but the impact may be very limited due to China’s overwhelming market dominance and strong backlog of orders, according to analysts and industry insiders.
The Office of the US Trade Representative’s months-long investigation into China’s shipbuilding and maritime industry has reportedly concluded that China has employed unfair policies and practices to establish dominance in the sector, Reuters said on Tuesday, citing anonymous sources.
The development, while not yet confirmed nor denied by the US, comes amid intensifying competition between the world’s two largest economies, as well as Washington’s efforts to rally more allies in a bid to decrease dependence on Chinese manufacturing and supply chains.
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Asian yards, including those from South Korea and Japan, could benefit if the investigation results in penalties being imposed on China’s shipbuilders. Nevertheless, analysts and an executive from a major Chinese shipbuilding company said that the substantial scale of China’s shipbuilding industry and its cost advantages are too strong to significantly undermine.
James Chin, a professor of Asian studies at the University of Tasmania in Australia, said Chinese shipbuilders are safe in the near term – up to roughly 24 months – from any measures that the US might take.
“The orders are huge,” Chin noted. “They have long, long orders. They’ve overtaken the Japanese and the Koreans and everyone under the sun.”
And Nick Marro, principal economist for Asia at the Economist Intelligence Unit, said that, in the short term, demand for upgrades to existing ships could help China weather any US measures against it.
China has been the world’s largest shipbuilder for more than a decade. In 2024, China won 70 per cent of the world’s newbuilding orders, followed by South Korea with 17 per cent and Japan with 5 per cent, according to an annual report from shipping-data provider Clarksons Research.
Additionally, China “achieved market-leading positions in all main sectors, aside from gas”, the report said.
South Korean shipyards may benefit from the US strategy. Still, it would be impossible to supplant China, considering the production gap between the two countries, especially for container ships, in which China dominates with overwhelming newbuilding orders, said the Chinese shipbuilder’s executive, who declined to be named due to company policy.
Meanwhile, if US support leads to more orders, South Korean shipbuilders may increase their prices, which could benefit the entire industry, he noted.
Washington’s typical response to “unfair competition”, under what is known as a Section 301 investigation – after the relevant portions of the 1974 Trade Act – is to impose tariffs, quotas or other trade restrictions.
It is unclear what measures, if any, the US will adopt. US labour unions that requested the 301 investigation by the US trade representative suggested imposing additional port fees on Chinese-built ships calling at US ports.
Port charges on newbuildings would reduce the cost advantage for Chinese shipbuilders, as shipowners and charterers are likely to include these expenses in their calculations.
“Shipowners have prepared for that,” the executive said. “They could assign vessels constructed by other countries to the routes to the US while using China-built vessels for other routes.
“So, overall, we are not overly concerned.”
Song Seng Wun, an economic adviser at the Singapore-based financial services firm CGS, said it is possible that the US government wants to hamper China so Japanese and Korean yards could have time to catch up. However, he said, the impact would not be big.
“We’re talking about very expensive seagoing vessels. If you don’t want the Chinese to build them, who’s going to do it,” Song asked. “You can say we have Koreans and Japanese – basically the Asian yards. At this point, the Chinese shipbuilders are way ahead. Fast and cost-effective.”
With its domestic shipbuilding capabilities lagging behind, the US has been looking to tap its shipbuilding allies to compete with China.
“We don’t build ships any more,” US president-elect Donald Trump said in a radio interview last week. “We want to get that started. And maybe we’ll use allies, also, in terms of building ships. We might have to.”
And two months before the 301 investigation was launched in April, US Secretary of the Navy Carlos Del Toro visited major shipyards in South Korea and Japan with expectations that the two allies could lend a hand in reviving US maritime power.
In a 2023 speech, Del Toro announced his objective to “attract the most advanced shipbuilders in the world to open US-owned subsidiaries and invest in commercial shipyards here in the US”.
Regarding the US’ aim to bring shipbuilding back home, the shipbuilding executive expressed doubts about its feasibility, as the substantial cost gap would render the construction of commercial vessels in the US commercially unviable.
“No overseas purchase of large US-built ships has occurred in decades, because US-built ships can be four or more times the world price,” John Frittelli, a specialist in transport policy with the US Congressional Research Service, a public policy research institute of the US Congress, said in a note in late 2023.
The note pointed out that, in the previous several years, the US built only five or fewer large ocean-going ships annually, while China built more than 1,000 vessels each year.
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