Imagine a country where the maritime industry is an ancient tradition. Its long coastline shelters many harbours. Its citizens own a larger share of the world’s commercial fleet than those of any other country. Its financial institutions have a prominent role in ship financing, and its labour force includes an unequaled percentage of seafarers. It has long been a maritime power – yet it has little influence over military alliances, trade agreements, or the direction of the world economy. When it comes to geopolitics, its maritime prowess does not make Greece a major player.

This is worth keeping in mind amid the intensifying friction over maritime matters between the United States, its European and Asian allies, and China. President Donald Trump’s administration, like that of Joe Biden before it, has identified China’s expansive maritime presence as a threat to US security; the title of an executive order Trump signed last April, ‘Restoring America’s Maritime Dominance‘, makes that clear. China, meanwhile, continues to expand in almost every aspect of ocean shipping. Both governments deem the maritime industry and its supplier base essential if they are to project power and maintain prosperity. But if large shipping and shipbuilding industries were basic elements of global influence, countries such as Greece would be global powers. ‘Maritime dominance’, however that phrase may be defined, does not offer a path to peace or prosperity, military clout or economic strength. The very phrase is a relic of an earlier era.

There was, to be sure, a time when control of the seas could cement a nation’s standing in the world. Spain’s massive treasure fleet transported the Latin American gold and silver that made it Europe’s wealthiest country in the 16th century. In the 18th and 19th centuries, the shipyards of Britain’s Royal Navy formed the largest industrial enterprise in the world, employing thousands of craftsmen to build and repair the warships that enabled it to vanquish France, take control of India, and dominate global manufacturing. The United States created a state-owned company, the Emergency Fleet Corporation, to finance construction of merchant ships that successfully maintained supply lines to Great Britain and Western Europe during the First World War; it ultimately built 2,318 commercial vessels in US yards, most of them after the conflict’s end in 1918. The United States’ ability to build and crew thousands of naval and merchant ships was critical to the Allies’ victory in the Second World War and America’s dominance of the non-Communist world for decades thereafter.

Since then, once-vibrant maritime industrial bases have rusted badly in many countries. Only a fraction of one per cent of the commercial ships in use today was built in US shipyards – and nearly all those vessels serve domestic routes reserved by law for US-built ships, ferrying oil between Alaska and California and groceries between Florida and Puerto Rico. Automobiles imported from Asia and Europe arrive on foreign-built vessels, and while a sizeable share of US natural gas output is exported by sea, none of the hundreds of liquefied natural gas carriers in international service was built in the United States. Even the few US-built ships in commercial fleets frequently incorporate foreign-made components, because the few US manufacturers of large engines, propellers and the like cannot match foreign prices and often lag technologically. Warships for the US military are usually built in separate yards known for their low productivity and high costs, frequently attributed to the Navy’s habit of demanding design changes on vessels already in production.

The story in Great Britain is similar. It was the dominant shipbuilding country for two centuries. In the years immediately after the Second World War, its archaic shipyards still accounted for around half the world’s new shipping tonnage. Japan displaced it as the largest shipbuilding country in 1956, relying on cheap labour, cutting-edge production methods, and low-cost financing to advance quickly from exporting blouses and transistor radios to complex, high-value durable goods. As Japanese-built oil supertankers and ore carriers conquered fast-growing markets, Britain’s maritime industry retreated. The nationalisation of its shipbuilders in 1977 could not stave off collapse. For the past four decades, the British share of global commercial shipbuilding has been infinitesimal, and British-owned ship lines have faded from the scene.

Western Europe fought back harder by subsidising its shipyards, but it soon found a subsidy war impossibly expensive. Diplomatic efforts to limit ship subsidies accomplished little. After demand for oil tankers collapsed following the 1973 oil crisis, governments shovelled vast amounts of money into shipbuilding and supplier industries, such as steelmaking, to the point of commissioning ships with no buyers in sight just to keep workers employed. The cost proved unsustainable. World ship output, measured in terms of capacity, fell by nearly two thirds between 1975 and 1980. From Sweden to Germany, North America to Japan, armies of workers lost their jobs as shipbuilders and maritime suppliers closed down. Much of the world’s shipbuilding shifted to South Korea, where government planners picked it as a high-priority industry and pressured industrial conglomerates to create shipyards. Offering low labour costs and attractive state-supported loans to ship buyers, South Korea displaced Japan as the largest shipbuilding nation in 2004. The government pushed exporters to use Korean container ship lines, which soon ranked among the world’s largest.

By the early 2000s, China was becoming a major force in shipping. Successive five-year plans have emphasised marine transportation and shipbuilding, propelling the growth of China’s maritime complex, even as commercial shipbuilding and its supplier industries have atrophied in most of the world. In addition to amassing the world’s largest navy (measured by the number of vessels), it now builds more than half the world’s new oceangoing ships, up from just five per cent a quarter-century ago.

This remarkable accomplishment has required massive state assistance, not just to shipyards, but to a wide variety of feeder industries. Most of the world’s ship-to-shore container cranes come from China, along with ship engines, propellers, the 40-foot-long containers that carry much of international trade, and the equipment used to move those containers between ships, trucks, trains and storage yards. Manufacturers of all these products benefit from inputs heavily subsidised by local or provincial governments and often from favourable financing through state-controlled banks. In addition, entities partially owned by China’s national government operate the world’s fourth-largest container ship line and control container terminals in many countries.

As China’s relations with the United States, Europe, Japan and Australia have deteriorated over the past few years, suspicion has mounted that some of these investments related to shipping have potential military uses in addition to commercial purposes. Some vessels operated by Chinese companies are believed to have decks strengthened to carry armoured vehicles, a costly feature that would make no sense on a ship intended only for commercial use. Military strategists envision China marshalling merchant vessels to support an invasion of Taiwan. Some of the container terminals run by Chinese or Hong Kong entities are near maritime chokepoints, such as the Panama Canal and the southern entrance to the Red Sea, where they could support Chinese efforts to obstruct major sea routes in the event of conflict.

China’s maritime expansion has triggered reactions around the world. In the United States, where unions representing shipyard workers have pushed the far-fetched claim that China is responsible for the decline of US shipbuilding, both Republicans and Democrats back ‘port fees’ on Chinese-owned ships and Chinese-built ships arriving in US ports – imposed in October, and then suspended until November 2026 following a recent meeting between Trump and Chinese leader Xi Jinping. The fees will supposedly fund the administration’s ‘Maritime Action Plan’ to ‘revitalize and rebuild domestic maritime industries’. Trump has obtained commitments from South Korea and Japan to help revive the US maritime supply chain. The United States has also slapped tariffs on Chinese-made shipping containers, ship-to-shore cranes, and the steel chassis on which trucks move containers to and from ports. France, Germany, Italy, Finland, Sweden, Japan, South Korea and Australia are all pumping money into their shipyards as well; and while their main interest is expanding their naval and coast guard fleets, increased naval shipbuilding will support companies in each country that can also supply inputs for commercial ships.

It is not obvious what these various measures will accomplish. While many countries want to revive their shipbuilding industries, they also want to protect suppliers with tariffs and quotas. As a result, steel, heavily used in building ships and marine equipment, costs far more in the United States than in Europe and Japan, and twice as much as in China. This alone makes it impossible for shipbuilders elsewhere to match Chinese prices without large subsidies. Nor do most high-wage countries have the skilled labour needed for a maritime revival. Engineers, welders, and shipfitters skilled in shipyard work have been leaving for more attractive opportunities in industries such as aerospace. South Korea has managed to remain the second-largest shipbuilding country only by importing workers from Vietnam and Indonesia to take shipyard jobs Koreans don’t want.

Perhaps most challenging of all, ocean-carriers’ decisions about where to build new vessels are closely tied to financing arrangements. There was a time when ship mortgages were the province of commercial banks, but many have retreated from the business. These days, government agencies, such as the Korea Development Bank, and state-controlled commercial lenders, such as China’s Bank of Communications, provide most of the money, often tying low-interest loans, loan guarantees or attractive leases to the shipowner’s willingness to order from domestic shipyards. With large container ships going for $150 million apiece and LNG tankers for as much as $250 million, a downturn in trade that depresses shipping rates can decimate a lender’s balance sheet; governments may stand ready to bear the risk.

Without such state backing, a shipbuilder has little prospect of competing in the global market. The United States learned this lesson after 1981, when President Ronald Reagan persuaded Congress to terminate the main subsidised loan programme; shipyard orders promptly collapsed. In Europe, the public sector has doled out large subsidies to shipyards that specialised in cruise ships and heavy-lift vessels. Operations that occupy highly technical niches, such as the Norwegian yards that construct submarines for underwater repairs and Finnish yards that build most of the world’s icebreakers, have survived thanks to the public purse. Very few of the giant container ships, vehicle carriers and ore carriers that transport international trade are built in Europe or North America.

The notion that each country should try to preserve an industry that builds civilian vessels is ill-conceived. Without large subsidies, small yards building a handful of vessels each year will never be competitive with China’s massive shipyards, which are frequently called on to produce several identical vessels over a period of years, lowering the cost of each as a result. The much smaller volumes in most American and European shipyards make investment in state-of-the-art production methods uneconomic. The only realistic means of competing with China is collaboration: Japanese and South Korean firms can take the lead in designing and building large commercial ships, while companies in other countries can focus on specialised vessels and equipment, from custom-designed propellers to dockside cranes.

The Europeans build fewer large merchant ships than they once did, but they possess an advantage that doesn’t get much attention in Washington: robust maritime service sectors. Although modern container shipping was developed in the United States, Western Europe is home to four of the five largest container shipping companies: Mediterranean Shipping, based in Switzerland; the Danish company Maersk; CMA CGM of France; and the German carrier Hapag-Lloyd. No major container-ship line is US-owned. The leading companies that manage ships and arrange for crews on behalf of vessel owners are based in Hong Kong, Singapore, London and Hamburg. In commercial ship design, Scandinavia, Britain and Japan are arguably the leaders. When it comes to building and running container terminals, Chinese companies face powerful competitors headquartered in places like Singapore, Dubai and The Hague, but none of the leading terminal operators is based in the United States.

Chinese leadership in commercial maritime matters is beyond dispute, as is America’s declining role. The connection between maritime prowess and geopolitical influence, however, is far from clear cut.

Much of the discussion of the need to restore merchant shipbuilding seems to be anchored in wars long past, when passenger ships played critical roles transporting troops to combat zones and civilian cargo vessels supplied armies with fuel and military supplies. These days, when even fourth-rate powers possess missiles and drones able to send merchant ships to the bottom of the sea, that case is less convincing. Moreover, in a tight fiscal environment, money spent to subsidise container ships and tankers is money that is not available for more urgent security needs.

Those needs are changing dramatically. While submarines are still vital, aircraft carriers and the battlegroups of smaller vessels that accompany them, once the symbols of geopolitical power, may be less valuable than they once were. They overtax military budgets – carriers being built for the US navy are expected to cost more than $13 billion apiece – and are vulnerable to missile and submarine attack. The naval combat ships of the future are more likely to be uncrewed, but few of the shipyards that build frigates and destroyers have experience with oceangoing drones.

Meanwhile, novel threats with clear security and economic implications are increasing, from the cutting of undersea cables and power lines to the expanding ‘dark fleet’ of unregistered and uninsured ships used to avoid sanctions, to the disruption of traffic through the Suez Canal by a Yemeni force armed with Iranian missiles. The construction of vessels designed to counteract such threats has proceeded slowly, as shipyards struggle to complete more traditional naval shipbuilding programs in the United States and other countries.

Realistically, building a commercial maritime-industrial base to compete with China’s would require vast sums of money. This would not be a one-time expenditure for retooling outdated shipyards and modernising crane factories. Grants and loans to manufacturers are only part of the story. Higher wages – which ultimately would be funded by larger public subsidies for commercial vessels – would be needed to attract workers into an industry they have shunned. Selling that industry’s products would entail a readiness to provide public-sector financing to shipowners – and to accept stunning losses when difficult economic conditions cause owners to default on their mortgages and leases. International collaboration to produce ships and maritime equipment at costs even remotely comparable to China’s cannot be taken for granted: shipyards tend to be large employers, and any government that will cede the jobs of well-paid workers represented by powerful labour unions is brave indeed.

Would approaching commercial shipbuilding as a collective venture diminish America’s standing as a great power? Hardly. Shipping is a thoroughly globalised industry, and no one worries about where a vessel was built. Nor would cooperation with friends and allies on maritime matters diminish the country’s ability to project force, deter adversaries and secure sea lanes. Nationalism has not served the maritime industry well, it is not likely to succeed in sustaining a defence against China’s challenge.