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Shipbuilding is having a moment in Washington. That’s great, but hype doesn’t float boats.

Reshoring commercial shipbuilding is billed as the key to maritime security. Proponents claim benefits to naval shipbuilding, sealift capacity, and a hedge against China — builder of over half the world’s commercial vessels — wielding its merchant tonnage for coercion.

The United States does need to build more ships — and fast — to meet China’s challenges. But throwing dollars at commercial tonnage won’t get it the boats that matter most in a fight: apex submarines, unmanned vessels, and other advanced naval systems. Efforts within the White House and Congress to build more ships are good, but they would also create new incentives specific to commercial ships. Instead, Washington should focus its limited shipbuilding dollars on naval ships — which are more useful in a war — and lean on Japan, South Korea, and other allies for merchant vessels. Industrial policy doesn’t have to mean “build everything here.” The government can put more Americans to work building what really matters at home and capitalize on allied comparative advantages where it makes sense.

Reviving Commercial Shipbuilding Won’t Help the United States Meet Its Military Goals

Advocates for domestic commercial shipbuilding say that it creates naval surge capacity for a future crisis. The United States does need more shipbuilding capacity to win future conflicts. But it has limited time and money to make that happen. Focus those dollars on developing the capacity to build the boats that are most important in a fight, like submarines and unmanned vessels.

The Navy isn’t producing submarines nearly fast enough, and no amount of commercial shipbuilding capacity will help. These boats are only built in specialized yards capable of nuclear propulsion work. Similarly, the facilities to make large commercial vessels won’t help us churn out the autonomous motorboat-sized vessels that the Navy needs to create the “hellscape” around Taiwan it envisions.

The Navy also lags in many other vessel classes and even basic maintenance. It’s true that plugging some of those gaps will require investments in traditional yards, like General Dynamics NASSCO, that make both commercial and naval vessels. But any added drydocks at those yards should be put to work building ships the Navy needs, like naval auxiliaries, and performing essential naval repairs — not given make-work merchant projects to maintain “surge capacity.”

The Navy’s production problem isn’t “someday” — it’s right now. If the goal is immediate readiness, any spare dollar and dry dock should go to closing the Navy’s gaps, not towards symbolic merchant hulls. Yes, commercial vessels do have military value on their own — they can bolster sealift capacity in a crisis. But given the limited amount of time and money the United States has to get its Navy in fighting shape, the United States should call on its shipbuilding allies to produce the commercial tonnage it needs for security. Allies can deliver far more of it, far cheaper — at roughly a quarter of the cost of domestic production.

Existing programs such as the Tanker Security Program and Maritime Security Program already provide a framework for securing foreign-built but U.S.-flagged vessels for emergency sealift. Provisions in the proposed “SHIPS for America Act” build on these programs, but give preference to U.S.-built ships. The United States should extend that preference to South Korean- and Japanese-built vessels. Although materially small for these large shipbuilding sectors, the support would strengthen what recent overhauls in Japanese and Korean yards already show: America plans to rely more heavily on its allies so it can focus on making warships.

Some advocates claim advantages to commercial shipbuilding besides surge capacity and sealift, arguing that “co-production” will benefit warship construction today. Don’t be fooled. Producing cargo ships to speed up submarine production is just as useless as building a bakery to make better rifles. Besides just submarines, the Congressional Research Service notes that commercial shipbuilding and warship construction are largely distinct. In the narrow areas where the two do overlap — such as the mutual need for skilled tradesmen — commercial and naval builds will compete for resources in the short run. Training workers takes time, and the Navy is struggling to build its shipbuilding workforce. Flooding the market with subsidized commercial orders will draw scarce workers away from more important naval projects.

Forcing commercial demand is ultimately a clumsy and indirect way to get more of the ships the United States needs in a war. Policies aiming to invest in shipbuilding are admirable, but capacity gains should go toward the boats the Navy needs, not on merchant vessels. In addition, lots more work needs to be done to fix the Navy’s production and repair bottlenecks. For repair work, plans to modernize the nation’s public naval yards are underway, but the Navy should also pursue a fifth public yard aggressively. Demand signals need to be rock-solid over long horizons to unlock private investment, yet the Navy has significantly modified its shipbuilding plans in recent years. Expanding multi-year procurement to more vessel classes can also give demand consistency in the near-term.

The Risk of Economic Coercion in Commercial Shipping is Overstated

Concern about Chinese economic coercion in commercial shipping is one non-military rationale for reshoring. This concern isn’t unfounded, just massively overstated. China could try to restrict new shipbuilding or who those ships are sold to. But, given the 30-year lifespan of merchant ships, that is like threatening to charge at someone with a steamroller — it’ll work, but only if nobody moves for a really long time. Ships aren’t like oil, lithium, or medicine. The world doesn’t run out of them overnight, which means Japanese and Korean yards would have time to adjust supply accordingly.

Chinese firms could also refuse to carry U.S. or allied cargo. Here, the issue is who owns vessels, not necessarily who produces them. By one measure, China owns 12.2 percent of the global commercial fleet. But compare that to Greece’s 17.6 percent and Japan’s 10.9 percent. Because merchant ships are interchangeable and ownership is diffuse, non-Chinese operators would step in long before severe impacts were felt by Americans. With robust Japanese and South Korean shipyards in place, there’s no need to duplicate an entire commercial shipbuilding industry from scratch just to blunt a marginal Chinese advantage. Especially when it takes dollars from submarines and other, higher-impact naval builds.

Onshoring Liquified Natural Gas Carrier Production Epitomizes Bad Shipbuilding Policy

The U.S. trade representative proposed a rule requiring that 15 percent of U.S. liquified natural gas exports travel on U.S.-built ships by 2047. Essentially, it makes a step to extend Jones Act-style U.S. vessel preferences from cabotage into international trade. The proposed rule is a prime example of misguided shipbuilding policy — providing minimal national security benefits at sky-high cost.

At the moment, the operation of the military is not heavily dependent on access to natural gas carriers. Their production is intensive in niche skills like membrane construction that don’t carry over to warships. We do want to make sure that allies can be reliably supplied with natural gas. That said, South Korea — producer of three-quarters of these ships — is a major buyer of U.S. gas and has every incentive to support this goal. The United States could see domestic carrier production as a way to increase the resilience of gas exports and control over where they flow. That is a good goal, but the benefits of onshoring are dwarfed by the costs. Using 2024 liquified natural gas exports and a notional large natural gas carrier’s annual carrying capacity on a round-trip to Europe, we compute that carrying 15 percent of 2024 exports would require building roughly 20 large gas carriers domestically. Based on carrier prices in South Korea, and assuming U.S. prices are quadruple South Korean prices, we estimate that U.S. production would cost about $15 billion more than buying carriers from South Korea. This doesn’t even count new infrastructure costs. U.S.-built vessel preferences under the Jones Act make shipping within the United States more costly. Similarly, the rule’s extended preferences would increase the cost of importing U.S. gas.

Repeal of the Jones Act would provide few benefits to most Americans, as most intra-U.S. trade moves on trucks and trains as a result of the policy. But there is no way to move gas to Europe on a truck, so enforcement of the rule would necessarily reshape trade flows. Considering the costs, the United States should lean on South Korea for the production of gas carriers and not tie up scarce docks, which could be building warships (or repairing submarines). If the United States wants more control over gas exports, providing incentives to flag and crew allied-built gas carriers would achieve similar goals at a fraction of the price — and support allied carrier production in the process.

The rule also turns good money into bad. Hanwha’s $5 billion investment in Philadelphia Shipyard is an allied step toward partnership and has the potential to defray infrastructure costs for naval construction. However, Hanwha is responding to bad incentives and plans to prioritize work on natural gas carriers. Even with their expertise, any gas carriers produced will likely consume massive subsidies. Policymakers should encourage investment in U.S. shipyards, but put that new capacity to work building and repairing naval vessels — not making wasteful gas carriers that provide few security benefits.

Conclusion

As Under Secretary of Defense for Policy Elbridge Colby has argued, America’s power has limits. The United States should lean on allies to help contain China geopolitically — but also geoeconomically. The United States cannot single-handedly outbuild Beijing everywhere, and it would be foolish to try. In areas like critical minerals, where China holds true monopolies, intervention is necessary. However, in commercial shipbuilding, where allies are world leaders, it’s just wasteful. Onshoring commercial production would be a costly symbol masquerading as strategy. Ignore the symbolism. Focus on substance. Let allies build the merchant ships. Americans will build the submarines. That’s how to meet China at sea — and win.

Sam Slocum received his Ph.D. in economics from Yale University and served as an economist at the Council of Economic Advisers from 2023 to 2024.

Peter Devine is an assistant professor of the practice in the Department of Economics at Boston College. He served as a fellow at the National Economic Council from 2023 to 2024. Earlier in his life, he served as an aviator in the U.S. Navy.

Image: Petty Officer 1st Class William Spears via DVIDS.