The Illusion of the Fortress: How Shipbuilding Became the Beltway’s Most Controversial Foreign Policy Issue
The MOC
By
Austin Gray, Stephen Rodriguez
October 8, 2026
Throughout the month of May, as the Navy’s top leaders trod dutifully up to Capitol Hill to pitch their ambitious shipbuilding plan, they faced a new adversary. They were requesting a record $65.8 billion specifically for shipbuilding. But shipbuilding’s staunchest supporters in Congress – members from Mississippi, Maine and maritime industrial districts are typically giddy over such spending – were denigrating and dunking on the Navy’s plan in every hearing.
Facing sharp questioning over Navy proposals to “explore foreign shipbuilding opportunities,” naval leadership was forced into a historic admission: the Pentagon explicitly intends to offshore the initial construction of four auxiliary vessels. The testimony laid bare a grim reality driving worsening policy tension: the United States has run out of domestic industrial mass, and must now turn to foreign statecraft should the Navy’s model of maritime deterrence hold.
This month, the White House waded overtly into the fray with an August 13th executive order. The EO emphasizes several aggressive Navy reforms – many of these, such as opening a fifth public shipyard and reforming NAVSEA, arrive long-awaited – of which opening U.S. Navy programs to overseas competition will stir the most political division. A long tradition of a Navy built in America has explicitly ended.
The numbers tell a story of staggering asymmetry: asymmetry that explains why the White House is risking support from shipbuilding constituents in an attempt to revitalize America’s Navy.
Beijing now commands 400 battle-force ships to Washington’s 291. Worse, China’s fleet can regenerate quickly, whereas the U.S. fleet can barely sustain its peacetime size, and has shrunk as the Pax Americana has eroded. Driven by massive state subsidies, China now constructs 47 percent of the world’s commercial shipping tonnage, while the United States builds a mere one-tenth of one percent.
Davy Jones Collapse – Not An Act
The beginning of the end of American shipbuilding autarky came with the Iran war. As energy prices spiked, the White House waived the Jones Act, so that foreign tankers could deliver fuel to American shores. This month, the Jones Act was waived a third time, for 90 more days.
By requiring all vessels moving goods between U.S. ports to be built, crewed, and flagged domestically, the law was historically defended as a sacred shield for sovereign sea power generation. In practice, it created a low-volume, uncompetitive cartel.
However, this temporary fix introduced serious geopolitical complications. MARAD tracking data revealed that nearly 29 percent of the voyages conducted under the waiver utilized Chinese vessels. The Jones Act waiver proved that Washington can no longer politically sustain the high energy prices of a closed maritime system, even when its current method of opening up creates reliance on its primary adversary.
Procurement Recoil and the Submarine Trilemma
2026 has thus emerged as the defining moment that shattered the Beltway’s legacy of shipbuilding protectionism. In congressional testimony, the Navy’s top leaders revealed that they intend to explore foreign shipbuilding opportunities. Specifically, they aim to outsource the initial construction of four fleet support oilers and logistics vessels to overseas yards, as well as modules for combatants. The White House’s EO now gives cover to the Navy, explaining that up to three Navy programs may be produced in overseas shipyards, under a “Finland Model.” Named for the deal to build American icebreakers immediately in Finland and then later in the U.S., the first two ships of a class may be built overseas, provided the foreign company capitalize a U.S. yard, build with American workers and supply chains, and license the design to the U.S. yard.
This policy has been actualized by Korean industrial giant Hanwha, who acquired Philly Shipyard in 2024, and this month bid to buy Austal’s Mobile, Alabama yard for over $1B. Hanwha’s rival Hyundai is said to be hunting its own American shipyard soil in which to plant a flag, and has been working with U.S. tech darling Anduril to build unmanned vessels in Korea. Soeul’s government has committed $350B in U.S. capital investment by January 2029. Tokyo – Japanese firms have so far been quiet relative to Korean – has committed a whopping $550B, much of it in shipbuilding
The Navy has bypassed domestic design bottlenecks too – naval architects are a scarce and slow trade in the U.S. labor market – by directly adopting the Dutch Damen landing ship medium (LSM) hull design. The lead ship will be built domestically in Mississippi, while the subsequent five vessels will be built by Fincantieri Marinette Marine in Wisconsin. This is the model attempted, and already botched, with an Italian frigate design.
Under AUKUS, the United States committed to selling three to five Virginia-class submarines to Australia. Yet, the domestic submarine industrial base is failing to meet its baseline construction targets. The Pentagon is now caught in a trilemma: it cannot build submarines fast enough to satisfy its own force requirements, let alone deliver promised hulls to Canberra, unless it integrates foreign labor and manufacturing techniques.
A Coordinated Maritime Blueprint
The United States has stopped pretending to be an autarkic maritime state, but is still using a patchwork of ad hoc waivers, transactional tariffs, and bi-lateral deals. The White House should implement a Coordinated Allied Maritime Industrial Strategy built upon a disciplined division of labor between growing domestic production and international outsourcing. Leaving uncertainty over key programs could allow the same defense budget hawks, such as senators who are typically elated over shipbuilding spending, to foment policy gridlock as the last hope to protect protectionism.
Secure Core Capabilities Domestically: All nuclear-powered platforms must remain locked within domestic yards, with Australian and British capital under AUKUS flowing in. Furthermore, all weapon systems, Aegis baseline 10 combat systems, vertical launch cells (VLS), and command-and-control architectures must be built and integrated within the United States. Last, smaller vessels like LSM, EPF, and MUSV are easily built in U.S. shipyards – these should not be outsourced. Most critical, and unaddressed by the administration, destroyers and their modules should be built in the U.S. and a third U.S. destroyer yard should be established.
Systematize the Allied Logistics Pipeline: Washington should abandon the rigid requirement that every support vessel be designed and built entirely in domestic yards, as the recent EO starts to do by carving out two logistics programs. Auxiliary platforms should be systematically, but not universally, outsourced to close allies.
Recalibrate the Jones Act Fence into Fee for Subsidy: The port-call fees and merchandise levies introduced in the Maritime Action Plan and the SHIPS Act must become not only blunt protectionist weapons, but targeted infrastructure funds. Revenue generated from the maritime entry fee, which is estimated at $6.6B per year, and further Chinese shipping penalties should be directed into a National Maritime Infrastructure Fund spent exclusively on domestic shipyards and shipbuilding workforce. Such funds could pave the way to lift the Jones Act, and replace it with a subsidy.
The United States has arrived at a structural turning point. 2026 has shown that shipbuilding is not just a domestic industrial issue, but rather a matter of global statecraft. This is a moment where the United States can choose to lead a global maritime network that matches the scale of its primary adversary.
Austin Gray is Co-Founder & CSO of Blue Water Autonomy where he is building autonomous ships. He previously worked in a Ukrainian drone factory and served as an intelligence officer in the U.S. Navy. He is a Term Member of the Council on Foreign Relations and co-host of shipbuilding podcast Rebuilding the Fleet.
Stephen Rodriguez is an Operating Partner at DCVC where he invests in a number of maritime companies, including Blue Water Autonomy. A Life Member of the Council on Foreign Relations, he is also the Director of the Atlantic Council’s Shipbuilding Task Force.
The views expressed in this piece are the sole opinions of the author and do not necessarily reflect those of the Center for Maritime Strategy or other institutions listed.
Center for Maritime Strategy
By Austin Gray, Stephen Rodriguez
Throughout the month of May, as the Navy’s top leaders trod dutifully up to Capitol Hill to pitch their ambitious shipbuilding plan, they faced a new adversary. They were requesting a record $65.8 billion specifically for shipbuilding. But shipbuilding’s staunchest supporters in Congress – members from Mississippi, Maine and maritime industrial districts are typically giddy over such spending – were denigrating and dunking on the Navy’s plan in every hearing.
Facing sharp questioning over Navy proposals to “explore foreign shipbuilding opportunities,” naval leadership was forced into a historic admission: the Pentagon explicitly intends to offshore the initial construction of four auxiliary vessels. The testimony laid bare a grim reality driving worsening policy tension: the United States has run out of domestic industrial mass, and must now turn to foreign statecraft should the Navy’s model of maritime deterrence hold.
This month, the White House waded overtly into the fray with an August 13th executive order. The EO emphasizes several aggressive Navy reforms – many of these, such as opening a fifth public shipyard and reforming NAVSEA, arrive long-awaited – of which opening U.S. Navy programs to overseas competition will stir the most political division. A long tradition of a Navy built in America has explicitly ended.
The numbers tell a story of staggering asymmetry: asymmetry that explains why the White House is risking support from shipbuilding constituents in an attempt to revitalize America’s Navy.
Beijing now commands 400 battle-force ships to Washington’s 291. Worse, China’s fleet can regenerate quickly, whereas the U.S. fleet can barely sustain its peacetime size, and has shrunk as the Pax Americana has eroded. Driven by massive state subsidies, China now constructs 47 percent of the world’s commercial shipping tonnage, while the United States builds a mere one-tenth of one percent.
Davy Jones Collapse – Not An Act
The beginning of the end of American shipbuilding autarky came with the Iran war. As energy prices spiked, the White House waived the Jones Act, so that foreign tankers could deliver fuel to American shores. This month, the Jones Act was waived a third time, for 90 more days.
By requiring all vessels moving goods between U.S. ports to be built, crewed, and flagged domestically, the law was historically defended as a sacred shield for sovereign sea power generation. In practice, it created a low-volume, uncompetitive cartel.
However, this temporary fix introduced serious geopolitical complications. MARAD tracking data revealed that nearly 29 percent of the voyages conducted under the waiver utilized Chinese vessels. The Jones Act waiver proved that Washington can no longer politically sustain the high energy prices of a closed maritime system, even when its current method of opening up creates reliance on its primary adversary.
Procurement Recoil and the Submarine Trilemma
2026 has thus emerged as the defining moment that shattered the Beltway’s legacy of shipbuilding protectionism. In congressional testimony, the Navy’s top leaders revealed that they intend to explore foreign shipbuilding opportunities. Specifically, they aim to outsource the initial construction of four fleet support oilers and logistics vessels to overseas yards, as well as modules for combatants. The White House’s EO now gives cover to the Navy, explaining that up to three Navy programs may be produced in overseas shipyards, under a “Finland Model.” Named for the deal to build American icebreakers immediately in Finland and then later in the U.S., the first two ships of a class may be built overseas, provided the foreign company capitalize a U.S. yard, build with American workers and supply chains, and license the design to the U.S. yard.
This policy has been actualized by Korean industrial giant Hanwha, who acquired Philly Shipyard in 2024, and this month bid to buy Austal’s Mobile, Alabama yard for over $1B. Hanwha’s rival Hyundai is said to be hunting its own American shipyard soil in which to plant a flag, and has been working with U.S. tech darling Anduril to build unmanned vessels in Korea. Soeul’s government has committed $350B in U.S. capital investment by January 2029. Tokyo – Japanese firms have so far been quiet relative to Korean – has committed a whopping $550B, much of it in shipbuilding
The Navy has bypassed domestic design bottlenecks too – naval architects are a scarce and slow trade in the U.S. labor market – by directly adopting the Dutch Damen landing ship medium (LSM) hull design. The lead ship will be built domestically in Mississippi, while the subsequent five vessels will be built by Fincantieri Marinette Marine in Wisconsin. This is the model attempted, and already botched, with an Italian frigate design.
Under AUKUS, the United States committed to selling three to five Virginia-class submarines to Australia. Yet, the domestic submarine industrial base is failing to meet its baseline construction targets. The Pentagon is now caught in a trilemma: it cannot build submarines fast enough to satisfy its own force requirements, let alone deliver promised hulls to Canberra, unless it integrates foreign labor and manufacturing techniques.
A Coordinated Maritime Blueprint
The United States has stopped pretending to be an autarkic maritime state, but is still using a patchwork of ad hoc waivers, transactional tariffs, and bi-lateral deals. The White House should implement a Coordinated Allied Maritime Industrial Strategy built upon a disciplined division of labor between growing domestic production and international outsourcing. Leaving uncertainty over key programs could allow the same defense budget hawks, such as senators who are typically elated over shipbuilding spending, to foment policy gridlock as the last hope to protect protectionism.
Secure Core Capabilities Domestically: All nuclear-powered platforms must remain locked within domestic yards, with Australian and British capital under AUKUS flowing in. Furthermore, all weapon systems, Aegis baseline 10 combat systems, vertical launch cells (VLS), and command-and-control architectures must be built and integrated within the United States. Last, smaller vessels like LSM, EPF, and MUSV are easily built in U.S. shipyards – these should not be outsourced. Most critical, and unaddressed by the administration, destroyers and their modules should be built in the U.S. and a third U.S. destroyer yard should be established.
Systematize the Allied Logistics Pipeline: Washington should abandon the rigid requirement that every support vessel be designed and built entirely in domestic yards, as the recent EO starts to do by carving out two logistics programs. Auxiliary platforms should be systematically, but not universally, outsourced to close allies.
Recalibrate the Jones Act Fence into Fee for Subsidy: The port-call fees and merchandise levies introduced in the Maritime Action Plan and the SHIPS Act must become not only blunt protectionist weapons, but targeted infrastructure funds. Revenue generated from the maritime entry fee, which is estimated at $6.6B per year, and further Chinese shipping penalties should be directed into a National Maritime Infrastructure Fund spent exclusively on domestic shipyards and shipbuilding workforce. Such funds could pave the way to lift the Jones Act, and replace it with a subsidy.
The United States has arrived at a structural turning point. 2026 has shown that shipbuilding is not just a domestic industrial issue, but rather a matter of global statecraft. This is a moment where the United States can choose to lead a global maritime network that matches the scale of its primary adversary.
Austin Gray is Co-Founder & CSO of Blue Water Autonomy where he is building autonomous ships. He previously worked in a Ukrainian drone factory and served as an intelligence officer in the U.S. Navy. He is a Term Member of the Council on Foreign Relations and co-host of shipbuilding podcast Rebuilding the Fleet.
Stephen Rodriguez is an Operating Partner at DCVC where he invests in a number of maritime companies, including Blue Water Autonomy. A Life Member of the Council on Foreign Relations, he is also the Director of the Atlantic Council’s Shipbuilding Task Force.
The views expressed in this piece are the sole opinions of the author and do not necessarily reflect those of the Center for Maritime Strategy or other institutions listed.