U.S. Regulation Triggers China’s $7 Billion COSCO Counter-Orders, Shipbuilding Weakness Exposes U.S. Security Risks as Washington Turns to South Korea

U.S. Port Fee Pressure Jolts COSCO, China Counters With $7 Billion State-Backed Orders
Global Carriers Accelerate De-China Supply Chains, China’s New Orders Slump as U.S. Manufacturing Limits Exposed at 0.1% Share
Washington Turns to South Korea’s Shipbuilders to Close a Security Gap Driven by Production Capacity

The front line of U.S.–China great-power rivalry is expanding beyond tariff barriers into the broader maritime shipping and shipbuilding industries. As Washington tightens pressure on China’s largest shipping group, COSCO, through steep port fees, Beijing has moved to shield the sector with roughly $7 billion in state-backed orders. Even so, as global carriers accelerate supply-chain realignment away from China, Chinese shipbuilders are seeing orders dry up, while the United States is exposing the limits of its own manufacturing base with a negligible 0.1% share of commercial shipbuilding. In a security environment where merchant shipbuilding capacity is inseparable from naval power, the United States is increasingly turning to South Korea’s shipbuilding industry as a strategic alternative.

COSCO Reels From U.S. Port Fees, China Mounts Defense With $7 Billion State Orders

According to major international media outlets including American Manufacturing on the 11th (local time), COSCO has signed contracts with state-owned China State Shipbuilding Corporation (CSSC) to build 87 new vessels. Spanning container ships, tankers, and bulk carriers, the contracts are valued at approximately $7 billion. The move is widely interpreted as a strategic effort by Beijing to use its state industrial system to offset an order vacuum triggered by broad U.S. containment measures.

In January last year, the U.S. Department of Defense placed COSCO on a blacklist by designating it a “military company operating in the United States.” While COSCO promptly denied the designation and pledged dialogue with authorities, market concerns have persisted. The core issue is COSCO’s deep entrenchment in the U.S. logistics market, which makes it difficult to avoid the impact of sanctions. According to Singapore-based shipping analytics firm Linerlytica, COSCO held a 16.5% share of the Far East–U.S. trade lane between May and November 2024, maintaining its position as the top carrier on trans-Pacific routes. That central role in U.S. logistics, paradoxically, has become a liability under sanctions pressure.

Beyond blacklisting, the U.S. Trade Representative (USTR) escalated pressure by finalizing port fees on Chinese vessels in April last year, with enforcement beginning on October 14. The fees were designed with a step-up structure that increases costs over time. Initial charges of $50 per ton are set to rise to $80 in April, then to $110 in 2027, reaching $140 by April 2028.

Ships built in China but operated by non-Chinese carriers are also subject to rising fees, starting at $18 per ton, increasing to $23, then $28, and ultimately $33 over the same period. According to analysis by maritime industry outlet gCaptain, a 50,000-ton Chinese-operated container ship could see per-call U.S. port costs surge from $2.5 million to as much as $7 million by 2028.

HSBC Global Investment Research estimates that, for a 10,000-TEU vessel, the measures would translate into fees of $600 per FEU. On that basis, COSCO is projected to shoulder approximately $1.53 billion in additional costs in 2026, while its subsidiary OOIL would face around $654 million. These amounts would absorb roughly 74% and 65%, respectively, of COSCO’s and OOIL’s projected 2026 operating profit.

While COSCO has stated it will maintain U.S. services despite operational challenges, HSBC expects the group to seek pragmatic alternatives to ensure survival. Potential options include redeploying non–China-built vessels through the Ocean Alliance—formed with France’s CMA CGM, Hong Kong’s OOCL, and Taiwan’s Evergreen—or rerouting services via Canadian and Mexican ports instead of direct U.S. calls.

Regulatory Spillover Reshapes Shipbuilding, China’s New Orders Plunge 68%

As U.S. regulatory costs extend beyond Chinese carriers to encompass vessels built in China, global shipping lines are increasingly pursuing “de-China” strategies. Major container carriers such as Maersk and Hapag-Lloyd have begun replacing Chinese-built ships on trans-Pacific routes with vessels built in South Korea. The Premier Alliance—comprising South Korea’s HMM, Japan’s ONE, and Taiwan’s Yang Ming—has also removed ten Chinese-built vessels from its operating roster as part of broader service restructuring. These moves underscore how Washington’s high-intensity pressure has evolved into a tangible profitability risk, forcing carriers to overhaul fleet deployment strategies.

This avoidance of Chinese yards, compounded by a downturn in global shipping demand, has dealt a severe blow to China’s shipbuilding sector. According to Clarkson Research, global newbuilding orders in the first half of 2025 fell by more than 50% year on year, marking the weakest level since 2021. Trade deceleration driven by U.S. tariffs, rising raw material prices, and heightened currency volatility have sharply dampened ordering sentiment.

Against this shrinking market backdrop, China’s decline has been particularly pronounced. In the first half of last year, Chinese shipyards secured just 26.3 million DWT in new orders, down 68% from a year earlier. Data from the Center for Strategic and International Studies (CSIS) show that China’s share of global orders, which had climbed to 73% in 2024, fell to 53.3% between January and August last year. South Korea followed with 29.1%, Japan with 13.1%, while the United States managed only a marginal 0.1%. The figure starkly illustrates the erosion of America’s commercial shipbuilding base, increasingly viewed domestically as a national security risk.

China Builds 250 Ships, U.S. Seven—Merchant Capacity as Naval Power

Washington’s sensitivity to the decline of commercial shipbuilding is rooted in the security reality that production capacity translates directly into naval power. Analysts emphasize that a robust commercial shipbuilding ecosystem underpins the construction and maintenance of naval vessels, making the erosion of that base a direct threat to national security. According to U.S. Naval Intelligence data, China’s annual shipbuilding capacity stands at 23.25 million gross tons, compared with just 100,000 gross tons in the United States—a gap of roughly 232 times. In 2024, CSSC built more than 250 ships, while the United States produced only seven.

This disparity has already reshaped naval balances. In 2000, the U.S. Navy fielded 318 ships versus China’s 110. By 2020, China had overtaken the United States with 350 ships to America’s 293. The Pentagon projects that China’s fleet will reach 435 ships by 2030, while the U.S. Navy is expected to remain around 294.

Leveraging this quantitative advantage, China operates a “gray fleet” strategy, using merchant vessels in peacetime that can be mobilized for military operations in a crisis. Beijing has also unveiled large amphibious assault ships with aviation capabilities, including the Type 076 Sichuan. While the U.S. Navy retains qualitative superiority through assets such as 11 aircraft carriers and nuclear submarines, China’s more than 230-fold advantage in shipbuilding capacity—and its plans to expand its carrier fleet to six by 2030—are accelerating its technological catch-up. U.S. officials view China’s ability to project influence through sheer volume in areas such as the Taiwan Strait and the South China Sea as a concrete and growing threat.

Once a global leader, the U.S. shipbuilding industry has deteriorated to the point where even maintenance and repair of U.S. naval vessels is increasingly strained. Analysts cite a combination of factors behind the decline, including the unintended consequences of the Jones Act, which weakened competitiveness by shielding the industry from external competition, alongside aging facilities, workforce attrition, and chronic underinvestment. In response, Washington is pursuing a multi-track rebuilding effort. Congress has reintroduced the SHIPS for America Act, targeting the construction of 250 internationally trading vessels within a decade and explicitly calling for cooperation with allies. The Trump administration has likewise pledged aggressive measures, including the creation of a dedicated White House task force and tax incentives.

These initiatives are rapidly crystallizing into concrete U.S.–South Korea cooperation. In April last year, Huntington Ingalls, the largest U.S. naval shipbuilder, signed a technology cooperation memorandum with HD Hyundai Heavy Industries. More recently, HD Hyundai Heavy Industries and Hanwha Ocean secured successive contracts for maintenance, repair, and overhaul work on U.S. Navy vessels. With domestic capabilities stretched to their limits, America is increasingly viewing South Korea’s shipbuilding infrastructure as the most viable means of closing security gaps and restoring competitiveness.