Allied Competition or Collective Strength? The Risks of U.S. Shipbuilding Reshoring​

The United States has renewed its focus on revitalizing domestic shipbuilding capacity as part of a broader effort to compete with China’s dominance in the maritime domain. Policymakers have increasingly viewed shipbuilding not only as an economic concern, but as a critical element of national security, enabling both naval readiness and the sustainment of maritime logistics. However, the push to reshore shipbuilding capabilities carries underexamined risks. In seeking to rebuild its own industrial base, the United States may inadvertently undermine the commercial shipbuilding sectors of key allies, particularly South Korea and Japan. Absent coordination, such efforts risk fragmenting the allied maritime industrial base and weakening collective capacity to compete with China.

The People’s Republic of China’s (PRC’s) position in global shipbuilding is preeminent; their share of the global shipbuilding output is now above 50%. Over the past two decades, China has leveraged extensive state subsidies, preferential financing, and industrial policy to capture a dominant share of global ship production. Chinese shipyards benefit from economies of scale and a steady pipeline of both commercial and state-directed demand, thus allowing them to undercut international competitors. This model also supports a form of civil-military fusion, in which commercial shipbuilding capacity can be leveraged for naval expansion and auxiliary support in times of crisis. As a result, competing with China requires not only rebuilding capacity but doing so at sufficient scale to remain globally competitive.

The United States does not face this challenge alone as its allies, particularly South Korea and Japan, remain central to the global shipbuilding ecosystem, as their 28% and 16% shares of global shipbuilding output significantly bolster America’s less than 1% share. South Korea’s shipyards are among the most efficient in the world, specializing in high-value vessels such as liquefied natural gas carriers and large container ships. However, this competitiveness is sustained through narrow margins and exposure to global market fluctuations. Japan, once the world’s leading shipbuilder, retains advanced technological capabilities but has experienced a steady decline in global market share due to rising costs and an aging workforce. Together, these countries constitute the majority of non-PRC commercial shipbuilding capacity, providing scale and expertise that the United States currently lacks.

It is within this context that U.S. industrial policy risks generating friction, as efforts to rebuild domestic shipbuilding, particularly those involving subsidies or protectionist “Buy American” requirements, could displace demand that would have otherwise flowed to allied shipyards. Even modest shifts in global orders can have outsized effects in an industry defined by tight margins and cyclical demand. For South Korean and Japanese firms, reduced access to U.S. aligned markets could further erode competitiveness, accelerating trends that already threaten their long term viability.

To mitigate these risks, the United States should pursue a coordinated maritime industrial strategy with its key allies. First, Washington should establish a formal mechanism for aligning shipbuilding policies with South Korea and Japan. Such a framework could facilitate transparency on subsidies, production priorities, and long-term capacity planning, reducing the likelihood of harmful competition. Second, the United States should pursue a division of labor that leverages comparative advantages. Domestic shipyards could prioritize naval vessels and specialized platforms, while allied producers continue to dominate large-scale commercial construction. This approach would preserve allied competitiveness while strengthening overall capacity. Third, co-production agreements should be expanded to integrate supply chains and distribute production across allied shipyards. Joint projects would not only enhance efficiency but also deepen industrial interdependence, making the collective system more resilient to disruption. Finally, the United States and its partners should explore coordinated financing mechanisms to compete with the state-backed loans that underpin China’s shipbuilding dominance. Providing attractive financing options to ship buyers would help sustain demand within the allied industrial base without resorting to zero-sum competition.

Recent policy developments underscore both the promise and the tension inherent in this approach. In early 2026, the United States unveiled a new maritime industrial strategy aimed at revitalizing domestic shipbuilding while deepening cooperation with South Korea and Japan through a so-called “Bridge Strategy”, in which initial vessels may be constructed in allied shipyards before production is gradually shifted to the United States. While this model reflects a pragmatic recognition of the current U.S. capacity limitations, it also illustrates the delicate balance between collaboration and competition.

On one hand, it acknowledges that allied industrial bases are indispensable in the near term, reinforcing arguments for integration. On the other hand, the explicit goal of eventually onshoring production signals a longer term intent to internalize capabilities that are currently distributed across the alliance. This dual-track approach risks creating uncertainty for allied firms trying to make long term investment decisions, particularly if future U.S. policy shifts further toward protectionism. Without clear coordination mechanisms, even cooperative frameworks may evolve into transitional arrangements that ultimately displace, rather than reinforce, allied shipbuilding capacity.

Additionally, beyond the market displacements, there is a risk of inefficient duplication as recreating large scale commercial shipbuilding capacity in the United States may replicate capabilities that already exist within allied nations. While some redundancy is desirable for resilience, excessive duplication could reduce overall efficiency across the allied industrial base. Rather than maximizing collective output, the United States and its partners may find themselves competing for the same contracts, workforce, and supply chains. This fragmentation stands in contrast to China’s centralized and state-coordinated approach, which aligns production across multiple yards to achieve strategic scale. Additionally, industrial policies that prioritize domestic production over allied participation risk signaling distrust and complicating maritime security cooperation. Shipbuilding is not just economic ties, but also tied to alliances, defense coordination, and shared strategic goals. Exclusionary policies can erode the very trust needed for deeper integration that would be necessary to preserve crucial alliances.

However, in opposition to such fears, the concern that U.S. onshoring efforts will displace allied shipbuilding industries rests on a zero-sum assumption that does not accurately reflect prevailing market dynamics. Global demand for commercial and strategically relevant vessels, including LNG carriers, naval auxiliaries, and other specialized ships, remains robust, while leading producers such as South Korea and Japan continue to operate at or near full capacity. Their order books are frequently filled years in advance, thus constraining their ability to absorb additional demand in the near to medium term.

Within this context, the expansion of U.S. shipbuilding capacity should be understood not as a diversion of existing work from allied firms, but as a means of addressing unmet demand and alleviating structural bottlenecks across the global maritime industrial base. Increased U.S. participation has the potential to ease pressure on overextended allied shipyards and contribute to a more balanced and sustainable distribution of production. This added capacity is particularly valuable in contingency scenarios, where surge production and geographic diversification are essential to maintaining maritime logistics and operational readiness.

Furthermore, the presence of overlapping industrial capabilities across allied nations should not be viewed solely through the lens of inefficiency. A measured degree of redundancy enhances systemic resilience by reducing dependence on a limited number of production centers. Recent supply chain disruptions during Covid  underscore the vulnerabilities associated with overconcentration. Accordingly, the development of additional capacity within the United States can reinforce, rather than undermine, the overall strength and stability of the allied maritime industrial base.

The United States is right to prioritize shipbuilding as a strategic capability. However, the manner in which it pursues this objective will shape the broader balance of maritime power. A unilateral approach risks weakening the very alliances that provide a competitive advantage over China. By contrast, a coordinated strategy that integrates allied capabilities offers a path to restoring scale, resilience, and competitiveness in the global shipbuilding industry. The challenge is not simply to rebuild American shipyards, but to ensure that such efforts strengthen, rather than fracture, the collective maritime strength of the United States and its allies.

Matthew Smith is a student of maritime law interning in Washington, D.C., with interests in naval strategy, shipbuilding capacity, and the role of maritime law in global power competition.