Holding back economic advance of China has been one of the White House's major policy goals since the first term of US President Donald Trump .

But a proposal to counter Chinese dominance in shipbuilding, backed by huge state subsidies, isn't a Trump idea. It was petitioned for by five United States labor unions under the Joe Biden administration.

In February, the United States Trade Representative (USTR), which was tasked with investigating the issue, proposed a $1.5 million (€1.42 million) fee for any Chinese-made ship docking at a US port. The fee is justified, USTR said, to counteract what it sees as unfair advantages gained by China in shipbuilding that "burden or restrict US commerce."

Subsidies help China take the lead

Over the past three decades, China has become the dominant global force in ship production. In 2023, China's share of shipbuilding tonnage crossed the 50% mark, up from just 5% in 1999. The Chinese government has backstopped the sector to the tune of hundreds of billions of dollars while pushing out foreign competitors.

Despite China's incredible advance, Albert Veenstra, professor of trade and logistics at Erasmus University Rotterdam, in the Netherlands, criticized the false idea that the Asian giant has undermined the once-thriving US shipbuilding industry. 

"The reasoning is that China has wronged us by creating a shipbuilding industry. As a result, we don't have a shipbuilding industry anymore. But this is a strange idea," Veenstra told DW.

The decline of US shipbuilding is well documented. Once the leading shipbuilding nation, the country's priorities shifted after World War II and the industry stagnated. The last major growth spurt was in the mid-1970s, and the US' share of the shipbuilding market has been negligible ever since. 

It's Japan and South Korea that have lost out to China. Both countries have seen their combined market share fall from 60% to 45% over the past decade, according to data from UN Trade and Development.

Heavy industry not returning anytime soon

"Shipbuilding capacity shifted to Asia in the 1960s and later to China," explained Veenstra. He added that the US "will never compete again because to do that, you need a viable steelmaking industry, which in the US, has also been dying for 25-30 years."

Peter Sand, chief analyst at Copenhagen-based shipping analytics firm Xeneta, also believes it is "extremely late" to call out China. However, the proposal "does align with the Trump administration's target to limit Chinese dominance here, there and everywhere, especially where it relates to American business."

In early March, Trump doubled the tariff on Chinese goods entering the US to 20%, while imposing 25% levies on imports from neighboring Canada and Mexico. The Republican president has vowed new tariffs on steel and aluminum imports and is even considering so-called reciprocal tariffs, where the US matches the varying import tariffs levied on its products by other countries.

Another measure likely to cause price hikes

The proposed port docking fee is expected to significantly impact the cost of shipping goods to the US. Even if it is reduced to $1 million, Veenstra estimates a call at a US port would be 10 times more expensive for shipping firms than it is now.

Sand, meanwhile, told DW that "if a ship were to offload a thousand containers, an extra $1 million fee, for example, would add $1,000 to the cost of each container." He added that higher shipping costs would raise the price of imported goods and potentially help slow the US economy.

"Few importers can absorb costs like that without passing them on, so it will eat into consumers' purchasing power and, in the end, lower demand," Sand warned.

Stephen Gordon, the managing director of Clarksons Research in London, said the proposed measure could generate aggregate annual fees for the US of between $40 and $52 billion, "assuming there was initially no change to vessel deployment."

Clarksons calculated nearly 37,000 US port calls last year by ships that would likely face the maximum $1.5 million fee due to their connection to China, which Gordon said was equivalent to 83% of container ship calls but only around 30% of stops by tankers.

Ships could avoid US altogether

Shipping firms are already exploring alternatives to avoid calling at US ports. One strategy would be to reroute shipments through Mexico or Canada, and then transport the goods by truck or rail to their final destination.

"It may make economic sense to stop at Mexico or Canada instead, which shipping firms have increasingly done over the past five years. West coast Mexican ports were recently operating close to capacity," Sand noted.

Another way to circumvent the fee, particularly for non-Chinese operators, is to select ships without Chinese-built components or that weren't constructed in China. Firms may choose to change ownership rules that separate their Chinese and non-Chinese fleet to avoid the fees.

The legality of the proposed fee has also been questioned, given that international trade agreements typically aim to prevent discriminatory tariffs and fees. So the US could face more legal challenges from its major trading partners.

Little positive impact expected

Furthermore, the proposal is unlikely to lead to a significant reversal in US shipbuilding, many analysts believe, which has fallen to less than five new vessels per year, according to the United States Trade Representative.

"We don't have the shipbuilding capacity in Europe and the US anymore," said Veenstra. "South Korea and Japan don't have much spare capacity — only China. So I don't think the market can be easily reformed."

When combined with Trump's other "America First" policies, including a plan to retake the Panama Canal, the USTR proposal carries significant risks for global trade and supply chains. 

The plan is currently subject to consultation, a public hearing and a final decision by the Trump administration. Still, Veenstra offered a bleak outlook not only for China-linked shipping if the proposal is fully enacted.

"This regulation will touch all foreign ship owners. There will be only losers in the end," he said.

Edited by: Uwe Hessler