Trump, American Shipbuilding, and Trade
May 19, 2025
by William P. Meyers

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History and economics lessons in shipbuilding

President Donald Trump wants to rebuild America's shipbuilding industry. True, once (or perhaps three times) America had a great shipbuilding industry. Today the only major ships (the type used in international trade) made in America (or more specifically, the United States of America) are war ships for the U.S. Navy. Here I will look at the reasons for past booms and busts in American shipbuilding. Then I will look at Trump's plan for reinvigorating the industry.

Native American Indians did not build large ships, as far as we know. They did transport goods by canoe. The ships white (at first mostly English) colonists arrived in were much bigger than canoes, but far, far smaller than modern international shipping. They were made mainly from wood by skilled craftsmen. They were powered by the wind, though they might also benefit from currents, at times.

In the 1600s the American colonies started harvesting the raw materials for the English shipbuilders: trees and tree products. Small ships for use on rivers and short coastal trips were built. Over time sailing ships that could travel longer distances were built. The shipbuilding industry grew, favored by the availability of wood, craftsmen, and by hardy sailors. By the time of the American Revolution the shipbuilding industry was well established. The industry favored the creation of a real national government under the Constitution. It reward was the first substantial bill passed by Congress and signed by George Washington: the Tariff Act of July 4, 1789.

The Tariff Act imposed tariffs on imported goods, but gave a 10% discount if goods were imported on ships built in the U.S. and owned by U.S. citizens. It also allowed a reduced tariff on tea imported directly from Asia. U.S. ships, starting with the Empress of China had been trading with Canton since 1785. Soon a second act was passed, on July 20, 1789, that imposed tonnage charges on ships entering U.S. ports, with American built vessels charged far less than foreign built ships. Growth of the American shipbuilding industry was rapid. The American Navy was not created until 1798, but that too created profits for shipbuilders.

As early as 1793 the U.S. fleet had become the second largest in the world (England remained first). American had natural advantages, including forests that supplied the wood (and sealants) necessary for shipbuilding. But the long war between Britain and France, followed by a self-inflicted Embargo and then the War of 1812 between the U.S. and Britain, slowed the growth of the industry.

Free trade treaties made with Britain, France and other nations after the war brought a new period of prosperity for the industry during the 1820s. "The reputation of Yankee shipbuilders for turning out models which in speed, strength, and durability surpassed any vessels to be found brought about the sale between 1815 and 1840 of 540,000 tons of shipping to foreigners." [Faulkner, H., American Economic History, 8th edition, p. 226] America had the best skilled shipbuilding artisans in the world, and they were better paid than their counterparts in England and elsewhere.

Yet by the end of the century (1900) America had lost its shipbuilding edge. What went wrong? American wooden ships, driven by sail, were the best. Iron ships, and steamships, began to be built, but at first they had trouble competing with the wooden ships. As time went on the English fleet became more iron-hulled and steam-propelled. A tipping point was reached where it made more sense to transport goods by these modern ships than be the beautiful, hand-crafted sailing ships (including clipper ships) of the past. American shipping went into decline.

That is the main point to be taken from this essay, but there were more ups and downs to come. The U.S. still had a shipping industry, it just was not Number 1. When World War I broke out, given America's capacity to produce iron and steel, again our shipbuilding industry did quite well. After a lull during the Great Depression (why build ships when tariffs are so high there is little international trade), we again had a boom during World War II, with most of both the navy ships and the commercial shipping (aka merchant marine) paid for by the government. Into the 1950s, with the steel mills and port facilities of Japan, China, Russia, Germany, France and Great Britain bombed to debris or at least crippled, America continued to meet much of its own as well as global demand.

Over time other nations shipyards got to growing again. Some of them, notably South Korea, had lower labor costs. By around the year 2000, at least for large bulk carriers, it was generally agreed that Japan made the highest quality ships, Korea made fine ships at an attractive price, and China was up and coming. America? We made yachts, aircraft carriers, submarines, and destroyers, but not much in the way to the big ships used in international trade.

Updating to 2025: China dominates the shipbuilding industry, though South Korea still keeps pretty busy and Japan still has an industry.

So what is President Trump thinking? Bring industry back to America. When he was a child, in the late 1940s, America built a lot of ships. That employed a lot of labor at good wages. It also required a lot of steel, which in turn helped what was then the world's largest iron and steel industry.

His idea to make American shipbuilding great again is simple. It is the one the first U.S. Congress used. Charge high fees to foreign made or owned ships when they arrive in U.S. ports. Rather than pay those fees, merchants will prefer American ships. So America will build those ships. Simple.

Not. Modern ships for moving coal or iron around come in a variety of sized, but none are small. Except for those going to secondary ports, Capesize in the preference. These ships typically can carry 170,000 tons of cargo. They are typically near 1000 feet long and 150 feet wide. They are highly automated, so they carry small crews. Cost to buy a new one? Perhaps $100 million. In contrast a small bulk carrier, in the handysize class, might only cost about $25 million.

What would it take to set up a yard to build bulk carriers or container ships or large petroleum carriers? A lot. If the U.S. government gave me, say, $300 million to set up a shipyard and deliver 2 ships, the first thing I would do would be to hire a gang of experts. People who know how to design the ships themselves, and their parts like engines; people who know how to set up a shipyard; people who know how to actually convert a ship design into reality. I would need managers to manage all these people. I would need to find shipping companies to buy the two ships when made. I would figure on five years from cash in hand to launch of first ship, and that is probably optimistic.

But what is another $300 million for Trumps federal government when he is handing out tax breaks worth billions? Not much. But it really does not get much either. A shipyard that can produce one ship a year. And it would not be a profitable shipyard. It might break even, so you can take the $100 million payment and start building another ship after delivering one. But to have a real industry you would need to plan on producing at least 10 and more likely 50 ships each year.

So figure on $3 billion to $15 billion. Again, trivial compared to the federal budget. Keep in mind a nuclear-powered, Nimizt aircraft carrier, just one, costs $22 billion.

So it could be done, but fees on Chinese and other non-U.S. fleets are not going to do it. In 1789 a modest capitalist with a group of skilled laborers and access to a modest New England harbor could start building ships. Perfectly competitive ships. Profitable to build.

Someone needs to tell Trump it is not 1789, or even 1950. If he wants a modern shipbuilding industry, the U.S. government will need to heavily subsidize it.