Exclusive US investigation reveals China unfairly dominates shipbuilding, paving way for penalties, sources tell Reuters
Author: Andrea Shalal
WASHINGTON (Reuters) – U.S. President Joe Biden’s administration has concluded that China is using unfair policies and practices to dominate the global shipping, logistics and shipbuilding sectors, three sources familiar with the results of a months-long trade investigation told Reuters.
US Trade Representative (USTR) Katherine Tai launched the investigation in April 2024 at the request of the United Steelworkers and four other US unions under Section 301 of the Trade Act of 1974, which allows the US to punish foreign countries that engage in actions that are “unreasonably” or “unreasonably” or burdensome on U.S. commerce.
Investigators concluded that China targeted the shipbuilding and maritime industries for dominance, using financial support, barriers to foreign companies, forced technology transfer and theft of intellectual property and procurement policies to favor its shipbuilding and maritime industries, one of the sources said. who is not authorized to speak publicly.
Beijing has also “sharply and artificially reduced China’s labor costs in the maritime, shipbuilding and logistics sectors,” the person added, citing excerpts from the report.
No immediate comment was available from USTR, the White House or President-elect Donald Trump’s transition team. Chinese officials were not immediately available for comment.
The research cites data showing that China’s share of the $150 billion global shipbuilding industry has expanded to over 50% in 2023 from around 5% in 2000, largely helped by government subsidies, while once-dominant US shipbuilders have seen their share fall below 1%. South Korea and Japan are the next largest shipbuilders.
The report provides fresh bludgeoning to the new administration to strike at China and could pave the way for tariffs or port charges on Chinese-made vessels, as proposed by unions. Such a move would likely follow a period of public debate, they said.
Trump used the same Section 301 statute to impose tariffs on hundreds of billions of dollars of Chinese imports during his first term after a USTR investigation found that China misappropriated American intellectual property and forced the transfer of American technology to Chinese companies.
The USTR will release its findings later this week, days before Biden, a Democrat, leaves office on Jan. 20, the sources said.
The report comes after sharp criticism from the US and other Western powers over China’s aggressive industrial policies and overproduction of goods like steel, and reflects rare bipartisan agreement on the need to fix US shipbuilding. China denies any wrongdoing.
The report follows the Biden administration’s four-year effort to reduce China’s dominance by continuing Trump-era tariffs, adding new ones, including on electric vehicles, and imposing a series of export controls.
Tai’s office last month announced a last-minute trade probe into older Chinese-made “legacy” semiconductors that could pile up more U.S. tariffs on chips from China that power everyday goods from cars to washing machines and telecommunications equipment.
Experts agree that rebuilding America’s once vibrant shipbuilding and maritime industry will take decades and cost tens of billions of dollars. They said that tariffs alone will not be enough.
“China’s targeting of the maritime, logistics and shipbuilding sectors for dominance is the biggest obstacle to the revitalization of US industries in those sectors,” the report concluded, according to an excerpt shared with Reuters.
Scott Paul, president of the American Alliance for Manufacturing, a nonprofit labor and business partnership, said he understands the findings are compelling.
“As I understand it … a process will be put in place to try to stop the erosion of our shipbuilding industrial base and restart its growth,” he said.
Trump, who has said he will raise tariffs on Chinese goods to 60%, last week blasted its moves to dominate commercial and military shipbuilding, telling radio host Hugh Hewitt that the US had “suffered terribly” and needed to change course.
He also suggested that the US may have to turn to allies to build the necessary naval vessels for the US military.
Trump’s incoming national security adviser Mike Waltz was also deeply engaged on the issue, crafting a bipartisan bill with Democratic Sen. Mark Kelly to revitalize America’s shipbuilding industry before resigning from Congress.
“We are too dependent on China in particular. We don’t have great capacity. We have very little capacity to build ships, and for a superpower that is completely unacceptable,” said Paul.
The US now has only 20 public and private shipyards compared to over 300 US shipyards in the early 1980s. Experts say demand for civilian and military vessels is high and growing.
