This video explores the dynamic shift in the global shipbuilding industry, highlighting China's remarkable ascent to dominance. It underscores how China, once a follower in the industry, now leads with unprecedented production capabilities and output. China's strategic governmental support, skilled yet cost-effective workforce, and capacity for large-scale manufacturing have enabled it to surpass traditional leaders, such as the United States, South Korea, and Japan.

The U.S. has expressed concerns over this shift, primarily due to economic and national security implications. Once leading global shipbuilding, the U.S. has seen a steep decline, with its production capacity now significantly dwarfed by China's. The video delves into political responses, especially the strategies suggested by former U.S. President Donald Trump, to rejuvenate the American shipbuilding industry through tariffs and subsidies, aiming to revive what was once a robust industry.

Main takeaways from the video:

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Key Vocabularies and Common Phrases:

1. infrastructure [ˈɪnfrəˌstrʌktʃər] - (noun) - The basic physical and organizational structures needed for the operation of a society or enterprise. - Synonyms: (foundation, framework, base)

China owns that infrastructure.

2. predominant [prɪˈdɒmɪnənt] - (adjective) - Present as the strongest or main element. - Synonyms: (dominant, principal, chief)

Once upon a time, the US was the predominant force in shipbuilding.

3. sophisticated [səˈfɪstɪˌkeɪtɪd] - (adjective) - Having a refined knowledge or experience, often implying complexity. - Synonyms: (complex, advanced, intricate)

These are the hands that you need to build really sophisticated ships.

4. subsidies [ˈsʌbsɪdiːz] - (noun) - A sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive. - Synonyms: (grants, financial aid, support)

If the United States wants to go in that direction, it would have to provide some kind of subsidies to make it commercially viable.

5. maritime [ˈmærɪˌtaɪm] - (adjective) - Connected with the sea, especially in relation to seaborne trade or naval matters. - Synonyms: (nautical, marine, naval)

There are broader security concerns with allowing China to have a maritime edge.

6. capital intensive [ˈkæpɪtl ɪnˈtɛnsɪv] - (adjective) - Requiring a large amount of capital in relation to other factors of production, such as labor, to produce goods or services. - Synonyms: (investment-heavy, resource-demanding, fund-requiring)

The problem with shipbuilding is that it's very capital intensive.

7. strategic sector [strəˈtiːdʒɪk ˈsektər] - (noun) - An area of industry that is considered crucial for a nation's economy and security. - Synonyms: (key industry, crucial sector, vital industry)

The government then helped support shipbuilding as a strategic sector.

8. rejuvenate [rɪˈdʒuːvəˌneɪt] - (verb) - To make someone or something look or feel better, younger, or more vital. - Synonyms: (revitalize, revive, renew)

The U.S. has expressed concerns over this shift, primarily due to economic and national security implications.

9. levy [ˈlɛvi] - (noun) - An imposed fee or tax. - Synonyms: (tax, duty, tariff)

Donald Trump wants to raise revenue needed to boost ship production by way of fresh levies on Chinese built owned and operated ships.

10. geopolitics [ˌdʒiːoʊˈpɒlɪtɪks] - (noun) - Politics, especially international relations, as influenced by geographical factors. - Synonyms: (political geography, strategic studies, international politics)

This is really a story about geopolitics, how the US views shipping as a key national security strategic resource.

How China Came to Dominate Global Shipbuilding

Your bike, your couch, your kids, toys, even your car most likely crossed an ocean on a ship. And those ships, just like a lot of the stuff they're carrying, were very likely made in China. China is by far the world's largest shipbuilding nation. They have the steel, the aluminum, the parts, the components, the final assembly. China owns that infrastructure. Around 34% of all the ships that are currently on water were made in China. At the Same time, about 57.1% of ships currently under construction are at Chinese shipyards. Its share of ships produced globally grew from less than 5% in 1999 to over 50% in 2023. Not only does it dominate in shipbuilding, China also has vast controls over the wider ecosystem. Today, 95% of shipping container production is owned and operated by China.

A single shipyard in China now produces more ships every year than all of the American shipyards combined. Think of that. And it was a business that we used to dominate. Donald Trump, having already started a trade war with China, has ideas about how to even the playing field. We are also going to resurrect the American shipbuilding industry, including commercial shipbuilding and military shipbuilding. Donald Trump is doing a lot of things to try and reposition the US in the world tariffs, for example. These new measures are about a reset of the relationship with China. Such a reset would have far reaching consequences, potentially altering the landscape and economics of global trade.

So what's behind this push to bring shipbuilding back to America, and is it even possible? This is a particularly American obsession at the moment. Once upon a time, the US Was the predominant force in shipbuilding. The real high point for US shipbuilding was in World War II when they built these ships called Liberties. They built a few thousand of them and they really helped to keep the Allies in the fight against Nazi Germany. They supported supply chains and they were critical. What that did was create a very large shipbuilding capacity in the U.S. but the world has changed a lot in 80 years.

U.S. shipbuilding began to decline after World War II. By the 1970s, Japan was really taking over. By the 80s, Korea had joined and by the 2000s, China had joined. And today, really, those three countries are everything. China has been slowly building up its power and shipbuilding over the years, but it's only in recent years that it's overtaken South Korea and Japan as the world's top shipbuilding nation.

In the 2000s, China joined the WTO, and from there on you can see the economy growing, which really generated a lot of demand for ships in Beijing's 10th Five Year Plan. It actually came out with a vision for Growing China's ports and also shipbuilding industry. So that really laid the foundation and focus for its manufacturing sector, for its labor force to really rally around this vision of creating a globally competitive shipbuilding industry. Given the size, the scale of the way that China manufactures, this made sense. They were already very good at heavy manufacturing of things like steel beams and bars. It has a really strong domestic economy that is export oriented.

At the same time, China has a really highly skilled, highly educated, but relatively cheap labor force en masse. And these are the hands that you need to build really sophisticated ships. The government then helped support shipbuilding as a strategic sector for them to move into as they tried to upgrade from, from basic manufacturing into more and more sophisticated products. And that sort of initial push of government plus the beginning of an infrastructure then becomes a reinforcing cycle. The more that you create ships, the cheaper each one is.

That is in stark contrast to the US which has been exporting its manufacturing jobs for decades. The US like most advanced industrialized economies, is mostly a service economy. Manufacturing at the moment in the US across the board is only 8% of total employment. A China built container ship is somewhere in the order of 55 million. And the estimates for a U. S built comparable ship is more like $330 million. That price difference explains the massive disparity in ship production. Between 2020 and 2022, China had over 4,000 large ocean going ships on the order books, while the US had just 12. In 2024, the US built 0.01% of the world's commercial ships.

The center for Strategic and International Studies reported that one Chinese state owned shipbuilder built more commercial vessels by tonnage last year than the entire US shipbuilding industry's built since the end of World War II. The problem with shipbuilding is that it's very capital intensive, it's very labor intensive, it requires a whole infrastructure of support. So if you want to move into large scale production of very expensive, very sophisticated ships, then those are typically accompanied by significant subsidies. And that is where China's centralized government can really thrive.

Between 2010 and 2018, China's government's broad support for shipbuilding totaled $132 billion. And that number doesn't even include other forms of support, like directing state owned enterprises to offer low interest loans, debt forgiveness and equity infusions. If the United States wants to go in that direction, it would have to provide some kind of subsidies to make it commercially viable. For firms to make that transition, you're effectively going to have to subsidize an industry that isn't going to make any money and it's going to cost the taxpayer money.

Donald Trump wants to raise revenue needed to boost ship production by way of fresh levies on Chinese built owned and operated ships. The fees start at a million US dollars per docking and they go up from there. So it could be a million, it could be as high as $3.5 million for every time that a China built ship docks in the United States. And it goes beyond that. Any ship owner that has any Chinese ship in its fleet will also likely face these tax. One industry expert went so far as to call the proposal a trade apocalypse, potentially making American goods more costly, driving up freight rates and inflation and diverting trade away from US hubs.

That is going to drive up the cost of goods. So costs on the whole will go up as a result of this policy. Extreme levies could cause a ripple effect in US Supply chains as well. Ships will reorient their current routing and they will make a lot fewer stops in the United States. The distribution of goods could change. You'll do a lot more road and rail between ports instead of moving goods by ship.

The policy of the Trump administration so far has been to go it alone, America first, America alone. But if you want to go from basically very limited shipbuilding to full on finished container cruise ships, that's a huge jump. So perhaps the better policy would be what part of the supply chain do we think makes sense for US manufacturers to be in and how are we going to support them in that transition from not being involved very much in shipbuilding building to being much more actively engaged.

What the US does have are two strong allies, South Korea and Japan, with the capacity for greater output. But the push for US shipbuilding dominance isn't necessarily profit motivated. There are broader security concerns with allowing China to have a maritime edge. So this is really a story about geopolitics, how the US views shipping as a key national security strategic resource and how it's using that to broaden its influence in global trade routes.

Security argument says doesn't it seem like a problem that the United States cannot build ships on its own? And doesn't it seem like a problem that we are dependent on Chinese built ships to move goods around for the United States? But there's also overlaying that is sort of new Trumpian arguments about the importance of heavy manufacturing in general. The focal point on shipbuilding right now might just be part of a much wider strategy by Donald Trump to move everything around geopolitically. All these tariffs are happening. These are huge charges that he's proposing, so you have to frame it.

In the much wider conversation of what's going on with US politics right now, I don't think anybody's really imagining a grand restoration of shipyards in the U.S. the countries that have shown they can make money out of shipbuilding China, Japan, Korea are so dominant that it's hard to ever see a return to the way things used to be. Sam.

ECONOMICS, GLOBAL, TECHNOLOGY, SHIPBUILDING, CHINA, U.S. POLITICS, BLOOMBERG ORIGINALS