By Colin Grabow

In a year dominated by sharp partisanship, numerous lawmakers improbably united around the revival of America’s commercial shipbuilding industry. Congressional legislation that would channel billions into shipyard subsidies and new trade restrictions attracted scores of cosponsors. The White House issued an executive order aimed at maritime revitalization, and a trade pact with South Korea includes a pledge to invest $150 billion in U.S. shipyards.

But expectations of a genuine American shipbuilding renaissance should be kept in check. The United States is ill-suited to quickly transform from a virtual non-participant in commercial shipbuilding to a competitive producer of large cargo vessels. More likely is another round of costly subsidies, continued shipbuilding dysfunction, and little progress toward addressing the country’s key maritime challenges. Rather than devote substantial resources to this questionable enterprise, U.S. policymakers should pursue pragmatic solutions that more directly remedy commercial and naval shortcomings.

An Industry in Collapse

No major U.S. industrial sector has underperformed as consistently and predictably as commercial shipbuilding. Over the past decade, U.S. shipyards have accounted for less than three-tenths of one percent of global shipbuilding output. In 2024, they registered just 0.04 percent. Over the past quarter-century, U.S. production of oceangoing cargo ships has averaged less than three per year. A 2025 Government Accountability Office (GAO) report describes the sector as having experienced a “near total collapse.”

There is no mystery as to why. Constructed almost entirely for a captive domestic market, U.S.-built commercial vessels feature prices that bear no semblance to world levels. Three Aloha-class containerships under construction at a U.S. shipyard have a current projected cost of $334.5 million each. The same ships could reportedly be built in China for $55 million. Tankers that can be built for $47 million abroad are estimated to cost at least $220 million in the United States. And prices are spiraling ever higher. In 2013, an Aloha-class containership cost $209 million, and in 2020 the cost of a U.S.-built tanker was estimated at $150 million.

Construction timelines are similarly uncompetitive. The last U.S.-built containership delivered required approximately 40 months from the laying of its keel until its delivery in 2023. A similarly sized containership delivered by a South Korean shipyard that same year took less than six months. Of the last 10 containerships delivered by U.S. shipyards between 2004—2023, the fastest construction time was 19 months.

This subpar performance is not a recent phenomenon. Although U.S. shipyards, blessed with skilled workers and ample supplies of timber, were highly competitive in the country’s early days, they quickly fell behind when the era of wooden ships gave way to those built of iron and powered by steam. Between the Civil War and the early 1920s, U.S.-built ships were repeatedly found to cost 20 percent to over 100 percent more than the similar vessels constructed abroad. And now they cost far higher.

That the depth and long-standing nature of U.S. shipbuilding’s decline is so widely unappreciated is perhaps due to its vast output during World War Two. But citing the conflict as evidence of American commercial shipbuilding prowess misreads history. The country’s shipbuilding performance was driven by wartime exigencies and simplified ship designs for a government customer. Even at the height of production, U.S. yards either still trailed or only briefly matched the efficiency of leading foreign competitors, and never equaled them on cost.

When the war ended and government orders disappeared, domestic shipbuilding quickly reverted to its prewar state: high-cost, low-output, and internationally uncompetitive. World War Two is properly viewed as an anomalous event amidst an enduring decline in domestic shipbuilding.

It is a downfall that beefed-up federal subsidies alone are unlikely to reverse.

The SHIPS for America Act: A Costly Illusion

The centerpiece of today’s shipbuilding revival effort is the proposed SHIPS for America Act, which relies on new subsidies and protectionist measures as its key pillars. Its most ambitious provision would devote billions to the creation of a “Strategic Commercial Fleet” of 250 U.S.-built cargo ships over the next decade. Other key elements include requirements that certain percentages of U.S. energy exports and imports from China be carried on vessels that are U.S.-flagged and built, as well as tax credits, loan support, and direct grants to shipyards.

The act would undoubtedly stimulate the construction of some new ships. Whether it would launch a robust, self-sustaining shipbuilding industry or provide benefits commensurate with its costs, however, is another matter entirely. 

If one wanted to competitively construct large, oceangoing cargo ships, the United States would not be an obvious location for doing so for at least three main reasons.

First, American shipyards struggle to find sufficient labor to meet their current output. Shipbuilding is labor-intensive and requires a stable, highly skilled workforce. Yet Philly Shipyard is reportedly experiencing annual turnover approaching 100 percent, coupled with persistent issues such as drug use. Other yards also report labor difficulties (including quality issues), and worker challenges have been blamed for contributing to the U.S. Navy’s ill-fated Constellation-class frigate program.

Such issues are not limited to the graving docks and fabrication shops. Besides a dearth of production workers, there is also a deficit of naval architects.

Immigration reform or the hiring of foreign workers—for which U.S. shipyards have already demonstrated an appetite—could be one means of deepening the labor pool. Indeed, both Japan and South Korea have extensively utilized foreign workers to address labor shortages in their shipyards. This path, however, appears at odds with White House policy. Raising wages offers another solution, but it would also further increase the cost of U.S.-built ships and siphon welders, electricians, and other skilled tradespeople away from other industries that are contending with their own labor shortages.

Second, U.S. shipbuilding facilities are antiquated. A June 2025 GAO report found that most such infrastructure dates from World War Two, and observers have repeatedly characterized U.S. shipyards as decades behind their international counterparts in terms of technology. Such factors contribute to a yawning productivity gap and are unlikely to be quickly remedied. Notably, a Navy initiative launched in 2018 to modernize its own shipyards is envisioned as a twenty-year project.

Third, U.S. shipyards face inflated input costs. American steel prices—kept artificially high through tariffs—are a particular problem for those seeking to construct ships competitively. The absence of a robust network of domestic suppliers and a maritime industrial ecosystem compounds matters.

This list of challenges is not comprehensive. Others include the difficulty of locating waterfront property near major population centers that is suitable for major industrial facilities. Even if successfully identified, political difficulties may arise. The redevelopment of brownfield sites for shipbuilding involves years of red tape. Expanding capacity at existing shipyards can be nearly impossible due to physical constraints.

Building large commercial cargo ships in the United States at world prices is a formidable challenge, if not an impossible one. And none of this will change simply because Congress writes large checks.

History Shows Subsidy Limitations

Proponents of the subsidy-centered SHIPS for America Act describe it as a bold industrial strategy. But its playbook is familiar in many ways. At best, much of the bill amounts to new twists on past and current approaches that produced uninspired results.

Despite some claims to the contrary, U.S. shipbuilding policy is already infused with government intervention. Congress guarantees U.S. shipyards a captive domestic market through the Jones Act and related coastwise laws that ban foreign-built vessels from domestic commerce. Federal tax benefits, direct grants, and financing are also employed to encourage domestic shipbuilding. State and local governments offer further aid. Philly Shipyard alone has received more than $400 million in public support, in addition to its $1-per-year lease.

The most ambitious federal program was the 1936 introduction of “construction differential subsidies” that covered up to half the cost of U.S.-built ships. The purpose was explicit: Eliminate the price gap between domestic and foreign shipbuilding by covering up to 50 percent of the cost of domestically-built ships. But the measure failed to impel competitiveness, and storm clouds were gathering around the industry even before the subsidies’ withdrawal in 1981. It is a testament to U.S. shipyards’ dependence on such funding that output of 15-20 ships per year under the subsidy regime fell to typically low single digits in the decades since it ceased.

Subsidies and Jones Act-style requirements can temporarily stimulate production but create dangerous dependencies and incentive structures. There is little reason to believe they can close the structural cost gap or lead to internationally viable cargo ship construction. U.S. government interventions alone will not yield such competitive shipbuilding.

Scale Matters

Shipbuilding is an industry where scale, repetition, and specialization are decisive. Yet even if every provision of the SHIPS for America Act were implemented smoothly and fully funded, the resulting ship production would still fall far short of leading international shipbuilders.

The legislation’s Strategic Commercial Fleet envisions an average of 25 ship deliveries per year over 10 years. China, by comparison, delivered an average of 832 commercial ships annually from 2022 to 2024. Japan averaged 259, and South Korea 214. South Korea alone has four shipyards that are each capable of producing at least 40 ships per year.

Though an order of magnitude greater than current output, annual production of 25 ships—spread across multiple shipyards—would remain a rounding error in global terms. U.S. shipbuilding would be too small to reap economies of scale, too fragmented to specialize, and—not least—too sheltered to compete with the world’s most efficient builders.

The Competition Problem

Almost from the country’s founding, U.S. shipyards have been shielded from international competition. Federal subsidies and the ban on foreign-built vessels in domestic trade have created a small, captive market, severely dampening market forces that spur innovation and efficiency abroad. This lack of industry pressure has been repeatedly cited as contributing to the faltering of U.S. shipbuilding. Shipyards which do not face world-class competition and which serve customers who view high capital costs as a useful barrier to market entry should not be expected to attain world-class performance.

The SHIPS for America Act does little to change this. It preserves the Jones Act’s restrictions, expands federal shipyard grants to $100 million annually, and introduces new tax incentives. A further $11 billion over 10 years is devoted to the construction and operation of the Strategic Commercial Fleet. Although competitive bidding will be used to determine which shipyards construct the fleet’s vessels, the pool of competitors will be extremely limited.

Just two yards, Philly Shipyard and NASSCO, have built 79 percent (53 of 67) of U.S. commercial cargo ships delivered from 2000 to the present. NASSCO is already heavily committed to Navy work. Unless new yards are rapidly built or existing ones expanded—no easy task—competition will be minimal, and incentives for efficiency will remain weak.

This structure all but guarantees that U.S. shipyards will remain permanent clients of the federal government, dependent on continuous intervention to stay afloat.

Foreign Investment Offers No Panacea

Despite these myriad challenges, some insist that this time will be different, citing the leveraging of foreign expertise as a dramatic shift in the existing paradigm. The 2024 acquisition of the Philly Shipyard by South Korean shipbuilder Hanwha Ocean, along with its subsequent promises of investment, is often highlighted as an initial sign of this budding renaissance.

But foreign ownership of U.S. shipyards isn’t a novel idea. And, while helpful at the margins, it has never delivered game-changing results.

Philly Shipyard, which has built nearly half of all commercial ships delivered by U.S. shipyards since 2000, offers a case in point. Refurbished in the 1990s at enormous taxpayer expense, the yard was placed under the ownership of Kværner ASA, then Europe’s largest shipbuilding company, with the belief that modern facilities and foreign know-how would transform American shipbuilding. That never happened. Despite foreign training and engineering, the yard still produced containerships that cost five times as much as those built in Asia, and the facility has twice come close to shutting down.

Other examples of foreign ownership and cooperation abound. A Singaporean-owned shipyard in Brownsville, Texas (recently sold to Turkish firm Karpowership) has been plagued by cost overruns and vessels delivered years beyond their originally scheduled dates. Another shipyard in Pascagoula, Mississippi required five years to deliver the last two cargo ships it built while under the ownership of a separate Singapore company. This shipyard won a contract in 2019 to build heavy icebreakers for the U.S. Coast Guard, with delivery of the first vessel scheduled for 2024. Delivery has now been pushed to 2030, and its estimated cost has more than tripled.

NASSCO entered a long-running technology partnership with South Korea’s DSEC in 2006, and Japanese shipbuilders began exporting technologies to U.S. yards in the 1970s. None of these foreign interventions have produced competitive shipbuilding.

This experience isn’t restricted to the United States. Attempts by South Korean shipyards to create competitive subsidiaries in Romania and the Philippines have also proven disappointing. Plainly, there is more to the generation of world-class shipbuilding than foreign management and technology.

National Security Arguments Don’t Hold Up

With a paucity of economic rationales for the SHIPS for America Act—funneling tax dollars to internationally uncompetitive sectors and requiring the use of costly U.S. shipping is hardly conducive to prosperity—its backers have emphasized its alleged national security benefits. In particular, some supporters of the legislation argue that expanded commercial shipbuilding could introduce new efficiencies in the construction of naval vessels. Additionally, proponents contend that domestic construction would reduce dependency on foreign shipyards during times of war or national emergency. But these arguments suffer from significant flaws.

Although commercial and naval shipbuilding share some commonalities, they also diverge in significant ways. As one paper recently noted, there are “major differences in materials, production complexity, regulations, and design philosophies.” In 2006 congressional testimony, the commander of Naval Sea Systems Command stated that “one could argue they are separate industries.”

The fact that major naval shipyards—even with a captive domestic market—have largely abandoned commercial construction reinforces the point. Bath Iron Works, which builds destroyers, has not built a commercial ship since 1984. Ingalls Shipbuilding, another warship builder, has not attempted commercial construction since an ill-fated effort in 1999. Newport News Shipbuilding’s push to fill its orderbook in the post-Cold War 1990s with commercial tankers resulted in a loss of over $320 million.

Fincantieri Marine Group, meanwhile, constructs surface combatants at its shipyard in Marinette, Wisconsin, and commercial vessels at a separate shipyard in Sturgeon Bay.

This shipbuilding bifurcation isn’t uniquely American. Congressional Research Service analyst Ronald O’Rourke has noted that Asian yards engaged in both naval and commercial vessel construction make a concerted effort to separate workers by ship type. Japan’s Mitsubishi Heavy Industries is said to physically and organizationally “air gap” its naval and commercial shipbuilding.

A 2024 RAND Corporation analysis, meanwhile, found that the two types of shipbuilding may be growing increasingly independent in China, with shipyards “focusing either on naval or commercial shipbuilding, but not both.” Notably, South Korean shipbuilding firm Samsung Heavy Industries has eschewed the construction of naval combatants.

To be sure, overlap between commercial and naval shipbuilding does exist, and a scenario can be imagined in which increased commercial output helps spread certain fixed costs and overhead across more vessels. But consider the logic. Spurring commercial shipbuilding via subsidies would mean spending significant sums in the hope of recouping them through new efficiencies—a highly uncertain proposition.

Perhaps of greater concern is the potential impact of subsidy-driven commercial shipbuilding on naval shipyards’ ability to attract workers. Given existing labor pool stresses, there is considerable apprehension that an increased demand for ships could lead to workers being siphoned from existing yards (notably, Philly Shipyard has hired veterans of Gulf Coast yards to meet their labor needs). Labor constraints could lead to lengthened timelines, inflated costs, and intensified bottlenecks at naval shipyards already struggling with delays and overruns.

Such concerns are rooted in past experience. A 1975 GAO report highlights Navy congressional testimony the previous year which stated that increased commercial shipbuilding—boosted by federal subsidies—had led to shortages of skilled labor, contributing to delivery delays and higher costs for Navy ships.

In other words, subsidized construction of large commercial ships may actually weaken military shipbuilding. Similar logic applies to commercial shipbuilding, with workers and investment flowing to larger shipyards at the expense of smaller ones that are better positioned to develop a comparative advantage in the international market. It is not apparent what problem faced by naval shipyards would be solved by either a general increase in commercial output or by adding commercial shipbuilding to naval yards that already struggle to deliver combatant ships on time.

Questions Over the Reality of Wartime Shipbuilding

Other arguments in favor of boosting cargo ship construction are similarly problematic. Notions that commercial shipyards could quickly expand the U.S. merchant fleet in wartime or replace losses, for example, are far from clear. Oceangoing ships cannot be quickly conjured. Even leading foreign shipyards require 9-12 months to construct relatively less-complex tankers (as measured from construction initiation, vice the placement of orders). Additionally, U.S.-built cargo ships are highly reliant on imported parts and components (e.g., engines from South Korea and propellers from China), leaving them vulnerable to possible wartime interdiction.

Unless a conflict lasts for years, it is highly questionable whether domestic shipbuilding would play a significant role in determining its outcome. This isn’t theoretical. Of the hundreds of ships ordered by the U.S. government following its entry into World War I in April 1917, only a small number were delivered prior to the signing of an armistice in November of the following year.

Possessing a domestic commercial shipbuilding capacity is not without merit. But perhaps of greater importance is access to a large, modern fleet when hostilities commence.

Shipping industry veterans have pointed out that, rather than engaging in new construction, the United States could more expeditiously augment its merchant fleet by buying ships on the open market. With over 56,000 ships of at least 1,000 gross tons in the global fleet, including nearly 7,500 tankers and more than 6,700 containerships, there is considerable choice.

The United States could also expand existing subsidy programs that provide guaranteed access to U.S.-flagged vessels in times of war or national emergency, or establish a more liberalized second registry to expand the pool of merchant ships. The right of angary, employed by the United States in World War I, also bears consideration in the sealift calculus.

A More Purposeful Approach is Needed

None of this is to deny that the United States faces pressing maritime challenges. Navy shipbuilding is beset by lengthy delays and cost overruns. Burdened by high costs, the U.S. merchant fleet has continued its long-term decline, and coastal shipping has largely withered to those trades where alternative transportation modes do not exist. A shortage of mariners raises questions about the country’s ability to meet its sealift and economic needs.

At best, subsidized cargo ship construction is a highly inefficient means of addressing these concerns. Instead, more straightforward means should be employed to address the country’s economic and national security requirements. Possible policy measures include:

Ensure continuous production: U.S. shipyards often cite the lack of a consistent “demand signal” from Washington as a key contributor to their struggles. Such claims are not without justification. A lack of insight into future demand increases the difficulty of planning and investment to meet military shipbuilding needs. Instead of a cyclical feast-or-famine approach, the United States should aim for steadier, more predictable production.

Japan offers one possible model for such an approach. According to CRS analyst Ronald O’Rourke, the country builds one submarine per year, regardless of the overall defense environment. If more submarines are needed, the force can be expanded by extending the lifespans of existing vessels. Conversely, retirements can be used to trim the fleet when needed. Regardless, the approach ensures steady demand, more efficient construction, and the retention of skills, equipment, and technology necessary to build such vessels.

Leverage allied shipyards: Although the United States is fortunate to count some of the world’s most capable shipbuilders among its key allies, its ability to leverage these shipyards is greatly hampered by laws that restrict the construction and repair of military vessels overseas. If these laws were revised, as advocated by a growing number of experts, the path could be cleared to construct either large modules or entire vessels in highly skilled allied yards.

Domestic construction has value, but there comes a point at which it is surpassed by the benefits of utilizing allied shipyards that offer far shorter building times and dramatically lower costs. For numerous programs, including non-combatant vessels such as fleet oilers and icebreakers that have seen substantial delays and cost increases, the national security scales have almost certainly tipped in favor of allied construction.

Forgoing these capabilities in the hope that a massive and unprecedented turnaround in U.S. shipbuilding can be quickly engineered is highly risky, possibly leaving the military unable to obtain the vessels it needs at reasonable costs and within reasonable timelines to meet national security requirements.

Reform or repeal U.S. coastwise laws: There has long been clear evidence that U.S. coastwise laws place a significant economic burden on strategic industries such as steel and energy. But these laws also fail the country on more direct national security grounds. Forcing Americans to pay inflated prices for new vessels has not proven conducive to the development of a large, modern fleet or a robust shipbuilding industry.

At the very least, such laws should be reformed to allow the use of vessels constructed in allied countries. Dramatically reducing such capital costs would promote an expanded and modernized fleet, with accompanying economic and national security benefits—including additional employment opportunities for U.S. shipyards engaged in repair and maintenance work due to increased coastal commerce.

A bolder approach would be to scrap the law entirely and meet national security needs through targeted subsidies that promote the expansive employment of U.S. vessels and mariners.

Conclusion: An Industrial Strategy Without Industry

That lawmakers are finally paying serious attention to the country’s maritime troubles is a welcome and long-overdue development. For decades, policy failures in this domain have been treated as niche concerns rather than real threats to U.S. economic and national security. But the sudden enthusiasm for resurrecting large-scale commercial shipbuilding risks directing this new focus toward the least productive path.

The United States is nowhere close to becoming a competitive builder of large oceangoing cargo vessels, either under current conditions or under any plausible combination of subsidies or mandates. The structural barriers are overwhelming, including outdated shipyards, exceptionally high input and labor costs, and a workforce too small to sustain such an industry. The national security payoff is equally uncertain. Expanding commercial production is not an obvious solution to the issues that plague naval shipbuilding, nor is it an efficient method of bolstering the U.S.-flag merchant fleet.

What U.S. maritime policy needs instead is a clear-eyed assessment of its discrete problems and targeted strategies to address each one. Sealift shortfalls, mariner shortages, and the high cost of domestic water transport all stem from different causes and require different remedies, not a politically attractive but strategically hollow push to build more large ships. Innovation, regulatory modernization, smarter procurement, and a willingness to revisit long-standing assumptions would do far more to strengthen the maritime sector than another round of recycled industrial policy.

The time, resources, and political attention now focused on a commercial shipbuilding revival would be far better spent confronting the root causes of maritime dysfunction. A serious maritime strategy demands honesty about present conditions, not nostalgia for an industrial past. If lawmakers truly want to restore American maritime strength, they must craft solutions that reflect today’s challenges and realities.

Colin Grabow is an associate director at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies.

Featured Image: A Chinese shipyard. (Photo via Hudong-Zhonghua Shipbuilding)