China’s shipbuilders a likely Trump trade war target

Commercial ships are becoming the next US-China trade war flashpoint as Washington accuses Chinese shipbuilders of deploying non-market practices to win global market share.

The United States Trade Representative (USTR) has called for responsive actions after its Section 301 investigation found that China’s practices in shipbuilding, maritime and logistics have all undermined fair competition. 

The USTR released its findings on January 16, the same day the Chinese Ministry of Industry and Information Technology (MIIT) announced that China was the world’s top shipbuilding nation for the 15th consecutive year in 2024. 

The MIIT said China’s shipbuilding completion volume in 2024 accounted for 55.7% of the global total, meaning over half of the ships delivered globally last year were built in China. China’s shipbuilding industry’s new orders accounted for 74.1% of global volume and orders on hand accounted for 63.1%.

The MIIT said China completed 48.18 million tons of shipbuilding orders last year, up 13.8% from 2023. Newly received orders totaled 113.05 million tons, marking a substantial 58.8% rise year-on-year, while the order backlog reached 208.72 million tons, a 49.7% jump.

It added that China ranked first in new orders for 14 of the 18 mainstream ship types globally such as multi-purpose vessels, auto carriers and container ships.

Data from China’s General Administration of Customs showed that the country exported 5,804 ships in 2024, a 25.1% increase from 2023. The total export value surged to $43.38 billion, up 57.3% year-on-year.

China’s new shipbuilding orders for green power vessels represented 78.5% of the global market last year, compared with 31.5% in 2021, according to state-run China Central TV. 

“China now is capable of building nearly all advanced types of ships, from 24,000-TEU-level vessels to liquified natural gas (LNG) carriers and cruise ships,” Zheng Ping, chief analyst at industry portal Chineseport.cn, told the Global Times. TEU refers to “twenty-foot equivalent unit,” a unit of cargo capacity used for shipping.

“From steel and aluminum products, photovoltaic panels, to new energy vehicles and ships, the US has accused China of having ‘unfair’ competition, completely exposing the absurdity of its concept of ‘fairness’,” Bao Nan, a columnist at the Beijing Daily, writes in an article. 

Bao says China has spent four decades developing its shipbuilding industry and significantly boosted its investments in 2008 when the world’s shipbuilding sector was hit by the global financial crisis. He says the US can only blame itself for having allowed its shipbuilders to collapse one by one since the 1980s. 

Socialist market economy

On April 17 last year, the USTR initiated a Section 301 investigation of China’s acts, policies, and practices targeting the maritime, logistics and shipbuilding sectors for dominance. On January 16, the USTR said in its report that China’s targeting of the maritime, logistics, and shipbuilding sectors for dominance:

• displaces foreign firms, deprives market-oriented businesses and their workers of commercial opportunities, and lessens competition;
• creates dependencies on China and increased risk, and reduces supply chain resilience;
• is unreasonable because of China’s extraordinary control over its economic actors and these sectors;
• serves a broader purpose to strengthen all of China’s instruments of national power through China’s Military-Civil Fusion (MCF) strategy.

“Today, the US ranks 19th in the world in commercial shipbuilding, and we build less than five ships each year, while the People’s Republic of China (PRC) is building more than 1,700 ships,” said USTR Ambassador Katherine Tai. “In 1975, the United States ranked number one, and we were building more than 70 ships a year.”

“Beijing’s targeted dominance of these sectors undermines fair, market-oriented competition, increases economic security risks and is the greatest barrier to revitalization of US industries, as well as the communities that rely on them,” she said. “These findings under Section 301 set the stage for urgent action to invest in America and strengthen our supply chains.”

The USTR report said the Chinese Communist Party exercises significant influence over state-owned and state-invested enterprises across the maritime, logistics and shipbuilding sectors to develop the country’s “socialist market economy.”

Prior to this, the European Union had already pointed out in its report that China’s “social market economy” is the root cause of the country’s non-market practices. 

On April 10, 2024, the EU’s report on state-induced distortions in China’s economy said the Chinese government’s financial support and economic planning system has distorted many industrial sectors, including metals, chemicals, telecommunications equipment, semiconductors, railways, environmental goods, new energy vehicles and shipbuilding. 

Trump’s views

The Center for Strategic and International Studies, a Washington-based think tank, said in an article last May that China’s shipbuilding empire is the latest flashpoint in the intensifying frictions between Washington and Beijing. 

It said China’s shipbuilding prowess is also a matter of national security as many prominent Chinese shipyards, including the China State Shipbuilding Corp, produce ships for both commercial clients and the People’s Liberation Army Navy (PLAN). 

The USTR’s latest findings will apparently give new US President Donald Trump, to be inaugurated on January 20, new reasons to escalate the Sino-US trade war.

Earlier this month, Trump said in an interview that the US may outsource the production of its ships if it cannot boost its production capacity in the short run. 

“We used to build a ship a day. We don’t build ships anymore. We want to get that started. And maybe we’ll use allies, also, in terms of building ships,” he said. “China’s building, from what I’m hearing, every four days, they’re knocking out a ship. We’re sitting back and watching, and we’ve suffered tremendously.”

“The Biden administration’s Section 301 investigation against China targeting the maritime, logistics,and shipbuilding sectors seriously violates World Trade Organization (WTO) rules and is purely protectionism,” Guo Jiakun, a spokesperson of the Chinese Foreign Ministry, said on January 17. “The Biden administration blaming its own problems on China lacks factual basis and economic common sense.”

He said various US studies show that the US shipbuilding industry lost its competitive advantage many years ago due to over-protection. He said the growth of relevant industries in China is a result of companies’ tech innovation and participation in market competition, and that it also benefits from China’s fully-fledged industrial manufacturing system and vast domestic market. 

“The Biden administration irresponsibly launched the Section 301 investigation into China’s maritime, logistics and shipbuilding industries and drew erroneous conclusions based on the wrong investigation,” the China Association of the National Shipbuilding Industry (CANSI) said in a statement. “It was full of lies and distortions and was groundless accusations and malicious smearing of the development of China’s shipbuilding industry.”

“Based on some false accusations, the Office of USTR insisted on launching a unilateral investigation, and made irresponsible and unprofessional wrong conclusions,” it said. “Such a move will seriously disrupt the global shipping and logistics system and international trade order, and hamper the pace of green transformation of the global maritime industry.”

The CANSI said Chinese shipbuilders are contributing to the global green economy as they make a large amount of green equipment for ships at affordable prices. 

Yong Jian is a contributor to the Asia Times. He is a Chinese journalist who specializes in Chinese technology, economy and politics.