Last year the Biden administration ordered an investigation of unfair practices by China in the commercial shipbuilding industry. It was finished up and released just as Biden left office in January:
The report described a top-down, centrally controlled strategy by Beijing that not only puts the U.S. and other countries in a weak competitive position, but also threatens national security.
China’s share of the global shipbuilding market rose from less than 5% in 1999 to more than 50% in 2023, while pushing its ownership of the commercial world fleet to over 19% as of January 2024.
China controls 95% of global shipping container production, according to the report, and 86% percent of the world’s supply of intermodal chassis. The report said the targeting was enabled by government policies that unfairly depress costs or provide advantages.
Today the US Trade Representative announced how it planned to crack down on China over this:
Shipowners and analysts are trying to digest the proposal. Chinese-built ships face fees of up to $1 million for each U.S. port call based on the size of a company’s Chinese fleet.... There would be a second fee of up to $1 million based on how much of a company’s future ship orders come from Chinese shipyards. And for Chinese-owned operators like Cosco, there would be an additional fee of up to $1 million for each U.S. port call based on the ship’s size.
“For containerships their costs will be at least 10 times higher than existing charges and affect American importers, exporters and consumers,” said Lars Jensen, chief executive of Demark-based Vespucci Maritime, who advises several top shipping lines. “I hope that the public debate will avert this madness.”
That's a lot of fees, and many of them apply to shippers who merely own a single Chinese-made ship. But what are they supposed to do? Scuttle their existing fleet of Chinese ships? Sell them off to regional carriers who don't ship to or from the US? I don't know, but either way it's yet another big tax on Chinese goods entering the US.
And there's more! By 2032 US flagged/crewed ships need to carry 15% of US exports and US-built ships need to carry 5%. I'm not sure how this works since the US doesn't build any big ocean freighters these days, but I suppose we'll figure it out—most likely by punting when the day finally arrives. That's pretty often how we handle such things.
"The report described a top-down, centrally controlled strategy by Beijing that not only puts the U.S. and other countries in a weak competitive position, but also threatens national security."
So the Biden administration concluded that China's industrial policy achieved China's goals. Both from a market and national-security perspective. How about that.
... and yet I've always heard that every industrial policy is inevitably doomed to failure, smote by Adam Smith's invisible hand.
"So the Biden administration concluded that China's industrial policy achieved China's goals. . . . and yet I've always heard that every industrial policy is inevitably doomed to failure, smote by Adam Smith's invisible hand."
You've always heard wrong. Plenty of goals can be achieved by "industrial policy," the question is whether or not those goals are worth the tradeoff of decreased efficiency that very frequently comes from eschewing market-based tools.
Well. China seems to be kicking our butts on shipping, clean energy, and basically everything else. So we should be looking to them for inspiration on designing industrial policies that are worth the tradeoff, right?
No, we really shouldn't be looking at China as an example of anything.
Not least because they are not only still building coal plants but actually accelerating their coal plant construction (nearly 100GW in 2024!). But also because they are a one-party totalitarian system with a president-for-life and an exceedingly wasteful patronage economy.
Which, coincidentally, is exactly the sort of nation the Trumpers are trying to build here at home.
But, in terms of US clean energy industrial policy, I'd point to the IRA and Infrastructure Law under Biden as good examples of what to do: tax incentives and subsidies for built-in-the-US cleantech. That, and iniatives whereby the federal government's purchasing power is bent towards zero emission technology (say, by having the post office phase in an EV delivery fleet), are good ideas.
The Trump administration is illegally trying to block and unwind these efforts, though.
But also because they are a one-party totalitarian system with a president-for-life and an exceedingly wasteful patronage economy.
Sounds like a MAGA wet dream.
It's obviously not an exceedingly wasteful economy as it is kicking our buts.
Why on earth would you conclude that China is "kicking our butts"? China is a poor country--China's GDP per capita is ~$13k (about the same as Russia, fwiw), whereas that of Europe is $63k and that of the US is almost $83k.
The year is 2030. China has successfully invaded Taiwan and crippled the US fleet in the Pacific.
Aldoushickman: "They are totally not kicking our butts -- the Chinese GDP per capita is less than ours!"
Aside from the fact that successfully taking Taiwan is a far harder undertaking and is less likely to succeed than you seem to think, from an economic perspective, actually taking over Taiwan and remaking its economy in the image of the mainland would be terrible for China. They are dependent upon a lot of imports, and strangling the efficiency of the Taiwanese economy would put them in a terrible position.
If that happens it will be because China prioritized guns over butter while we prioritized butter over guns.
If you do not buy guns you lose wars to those who do even if your economy is better. Look at Europe, unable to give Ukraine the weapons it needs to beat Russia because Europe did not build the factories to make enough weapons.
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China isn't kicking anything. Their banking system is effectively insolvent. They have still have immense unrealized losses in their property sector, which is one of, but not the only, main causes of failure in the banking system. The current regime keeps shoveling resources into the grossly inefficient government owned industry. They continue to build infrastructure that will be decaying by the time anyone needs it. The demographic situation means that retirees won't have any pension or, thanks to the property losses, much savings. And they remain poor.
"Not least because they are not only still building coal plants but actually accelerating their coal plant construction (nearly 100GW in 2024!)." They're the worlds leader in renewable energy and still generate 65% of the per capita green house gases as the USA. China has gone from getting 80% of its electricity from coal to 55%. It's doing exactly what we want from a developing country.
The atmosphere/physics do not care about per capita emissions or about what percentage of a country's electricity comes from this or that source. A ton of carbon in the atmosphere does not do more or less harm simply because it is spread out among more or less humans.
The only thing that matters is how much carbon is pumped into the atmosphere, and getting that number to zero. Building out gigawatt after gigawatt of coal plants does not help.
"But also because they are a one-party totalitarian system with a president-for-life and an exceedingly wasteful patronage economy."
Yours is an odd argument -- the factors you are citing are clearly orthogonal to a successful economic policy. So why rely on them?
And yet it is such a common argument.
Another version is the rejoinder that "yes, the 1950s had strong unions and livable wages ... but the 1950s also had racism and sexism." As if the former causally depended on the latter.
Hillary Clinton offered another version when she asked: "If we broke up the big banks tomorrow….would that end racism? Would that end sexism?"
Yours is an odd argument -- the factors you are citing are clearly orthogonal to a successful economic policy.
No, they aren't. The factors he cites are the driving reason why the Chinese economy isn't as strong as you believe. It's why the government keeps shoveling resources to hopelessly ineffective state industries. It's why China can't stop building infrastructure that they don't need.
People have been claiming that the Chinese economy was about to collapse due to overinvestment or inefficient use of capital for the last 20 years. Forgive me if I am sceptical.
Also "It's why the government keeps shoveling resources to hopelessly ineffective state industries." As opposed to VC firms shoveling money into crypto, or AI, or Web 3.0.
well said
We’re at least three times richer than China.
Efficiency. God save us all from efficiency.
Just-in-time shipping is efficient.
Hospitals that are always at capacity are efficient.
Electrical grids that are balanced around normal peak load and not one erg more are efficient.
Removing wage floors is efficient.
Efficiency is the enemy of robustness, and of basic economy equitability.
Oh ffs, in case it wasn't obvious, I was using "efficiency" in the economics sense of the word: approaching optimal allocation/use of resources.
I certainly didn't mean "efficiency" to mean "stupidly fragile." It's economically efficient for systems to have adequate redundancy and flexibility to handle disasters and perturbations. To take one example:
"Hospitals that are always at capacity are efficient."
No, they are not. A hospital always at capacity is turning away patients, not investing in maintenance, and unable to prepare for growth. Now, some dumbass (who might even be a hospital administrator! Or some sort of private equity jackass) might look at a hospital that is always full and say "wowee, that looks eeeeficient to me!" but that doesn't mean that (a) the dumbass is right, or much less that (b) efficiency isn't a good goal for economic systems to have.
And I doubt you fundamentally disagree--I'd imagine that, whether or not it is currently raining where you are, you own at least one raincoat, but probably not 500 raincoats. I'd imagine further that whatever number of raincoats you own, that number is dictated by how useful you think it would be to obtain/get rid of additional raincoats, the cost of a raincoat, how much space you have in your closet, etc., and that, even if you don't currently have the number of raincoats that you personally consider ideal, you are capable of assessing that ideal, efficient number.
Nor am I saying that abstract efficiency is the _only_ goal economic systems ought to have. It isn't! But it is a pretty good goal that should generally be included (after all, it amounts to little more than an exhortation to not waste scarce resources), and well-thought-out markets are very frequently useful tools for achieving it.
Oh ffs yourself. Don't presume to lecture others on terminology, especially when their use of the term is perfectly in accord with what you're saying. It makes you look like an ignoramus at best, a studiedly-ignorant fool at worst.
Quick show of hands - how many of us _haven't_ taken at least the two-semester econ 101/102 classes to meet the minimum graduation requirements?
How efficiently real-world markets allocate resources appears pretty up in the air, anyway.
mostly agree
Efficiency is the enemy of robustness, and of basic economy equitability
An excessive emphasis on efficiency is bad, sure. Just like an excessive emphasis on redundancy is bad. The key is to strike a balance.
Clearly wrt to critical military kit, it's dangerous to rely excessively on imports, at least from enemies. But at the end of the day, "efficiency" is a critical element of productivity (indeed, they're not far from synonymous), and without improving productivity, we're all poorer and our country is weaker.
Balance!
Wouldn't decrease efficiency put the Chinese at a major disadvantage in international trade.
in the long run, sure, probably. But in the meantime, yes, a China that chooses to heavily support with state power certain industries will indeed be able to crowd out competition in those industries by having nominally "cheaper" products.
1. If (industrial policy decreases efficiency) then (Chinese at major disadvantage in international trade).
2. ~(Chinese at major disadvantage in international trade)
3. Therefore ~(industrial policy decreases efficiency).
Do you understand the phrase ":long run"?
In the long run we're all dead.
- John Maynard Keynes
Not necessarily, efficiency means different things with different contexts (and timelines), even in economics, market price mechanisms and distributed knowledge is different than industrial and trade policy, both those different than finance and arbitrage, etc.
Overall though, theory is only good for what's working in reality, there is a multilayered competition going on we want to win, or at least continue to be in the vanguard (since measuring a winner at any particular place in time is itself subjective and arbitrary, and it's not necessarily a zero-sum game either, multiple "sides" can be winners).
What's in it for Donnie?
A momentary feeling of dominance, and that's IMPORTANT to him.
My guess is this is some bright spark's idea of how to show JY-na who's the Boss, and everybody knew the Orange Guy would love it, so it got hustled up to him, and that was that. No proper analysis, no consultation with major stakeholders, no thinking it through.
And to the extent it filters down to the MAGAt masses, they'll react the same way. "Wooo, yeah! Kick China's ass!" Same as with TARIFFS, "the most beautiful word in the English language."
But will it ever happen? Will these multi-million dollar fees ever ACTUALLY be imposed? Will shippers be held to "required" cargo percentages? I'd put many-to-one against it, unless maybe somebody figures out how to use it to hurt some carrier the Orange Guy wants hurt, or to squeeze them for "donations."
It's "government" by kayfabe and gangsterism. And the people who voted for it will howl like dogs when it finally burns them.
Obviously China would hold a monopoly as the largest builder of (intermodal) cargo containers. We have thousands of empty one-way, single-use units sitting all over the US since we have a trade imbalance with them. Why would we want to increase costs of containers and to consumers when we should be taking advantage of China's super cheap containers? LOT-EK has been designing cargo container-based structures for over 2 decades. But what holds us back from taking full advantage are: (1) a lack of prescriptive codes, or at least a best practices toolkit, to make the permitting process and compliance easy and inexpensive and (2) zoning code allowances for these types of structures.
In the 2010s, FEMA had been spending over $120K per mobile housing unit for one-time use. The cargo container is inherently hurricane-proof, easily transportable, and its shell/skin is entirely recyclable.
So why don't we just use China's subsidized cargo containers to our advantage rather than raise the costs to our disadvantage?
If trump wants to break global supply chains I’m not going to complain. It was a great experiment and it enriched many people, but I’d say it was a failure in other ways. It’s reasonable to assert that we have all this drama because of it. It didn’t really prevent war. It might be responsible for the rise of authoritarian governments in the west. Cheap plastic junk pollutes the oceans and microplastics are everywhere. Maybe it’s not worth it.
I wonder… what if China were left out in 1990 and never let into the world trade system?
Globalism has nothing to do with the use of plastics. Plastic use was increased as a result of the US providing inherent subsidies because conservatives refuse to consider monetizing the costs of polluting.
what if China were left out in 1990 and never let into the world trade system?
(1) China's trade with the rest of the world was growing rapidly well before 1990. One of the reasons the Tiananmen massacre got so much attention was that it followed a period of liberalization—more than a decade, in fact. So there were hopes in the West that China was on its way to deep reform. And in some ways it did reform deeply—just not politically (as the events of June, 1989 brutally made clear).
(2) "Leaving China out of the world trade system" is about as feasible as a Musk Mars colony. Nearly one in five persons globally is Chinese. The ratio was even higher back then. There's no plausible scenario whereby the entire world conspires to shut out a fifth of humanity. Even if the United States had militantly maintained its Cold War stance vis-a-vis China all these years, the rest of the world certainly wouldn't have joined us.
Expect some chaos for a while until someone pays a big fat bribe. I mean, what else?
So if I understand correctly, they're slapping these fees not just on ships/containers *originating* in Chinese ports, but any vessel that's *made* in China, even if it's coming into Newark from, say, Rotterdam?
I'd say this was being done to protect the fledgling US super container ship industry. But what industry? It's just gratuitous idiocy.
It is to protect the S. Korean ship building industry. Hyundai most be paying Trump bribes.
There's this excellent summary of the Chinese shipping and ship building hegemony
https://www.strategypage.com/htmw/htseamo/articles/2025022204837.aspx
It begins:
February 22, 2025: Chinese shipyards construct nearly 70 percent of the Container, or Box ship markets. These vessels are the largest cargo ships to ever go to sea. The largest container ships weigh up to 250,000 tons and are 400 meters long. That’s 15 percent longer and more than twice as heavy as the largest aircraft carriers, like the U.S. Nimitz class.
Container ships can carry over 24,000 TEU/Twenty Foot Equivalent 6.1 meter metal containers. These ships have crews of fewer than fifty officers and sailors. The Nimitz has a ship’s complement of about 5,000 personnel.
The builder and owner of most of these containerships is China Ocean Shipping Company or COSCO, which operates a fleet of nearly 400 24,000 TEU capacity container ships. COSCO is owned by the Chinese government and its ships are available for use by the military. In wartime that means COSCO ship officers have been trained to deal with operating their ships in support of combat operations.
COSCO is a $26 billion a year business that also owns ship repair facilities and port operations around the world. Meanwhile South Korea is getting back into the construction of these 24,000 TEU ships with orders for 24 ships. In response to that the Chinese are planning to build 32,000 TEU ships.
...and segues into how it facilitates Chinese intelligence and influence arm-twisting.
It's been puzzling me for decades that the US has been allowing economic forces to override national security considerations. As the world's greatest military power, you would think the US should be able to produce not only its own weapons but its own support systems as well. However, the US is not self sufficient in such basics as steel and aluminum, and as we've just read does not produce ANY large ocean going freighters, which are every bit as needed as warships to project power.
I expected Reagan to take steps to take steps to preserve the US's ability to produce militarily essential commodities, but he didn't and no president or Congress since then has either.
Surprisingly enough, I think Trump has the right idea in trying to increase steel and aluminum production in the US, but in typical Trump fashion he's doing it all wrong and assuring that his efforts will fail. What's needed is a much more deliberate legislative program with subsidies for American producers and modest tariffs on imports that aren't scheduled to start for about five years, that being about the amount of time it takes to get a steel mill or aluminum smelter built and operating.
I would note that until Trump blew up the relationship, the US could count on Canadian production as effectively the same as domestic production. This, of course, is no longer true.
The same applies to ships. The US should be prepared to subsidize US shipyards to produce the types of vessels that will be needed to support a major war overseas, and produce them fast enough to deal with combat losses, which will assuredly happen in a major war.
Because globalization benefited owners and held wages down. Immigration did the same for jobs that could not be sent overseas. Look at the decline in the labor share of income, see how it lines up with the destruction of American manufacturing following the granting of permanent most-favored-nation status to China. Destruction that Kevin has acknowledged, and yet would still repeat!
https://www.mckinsey.com/featured-insights/employment-and-growth/a-new-look-at-the-declining-labor-share-of-income-in-the-united-states
As prophesied, we sold them the rope with which they shall hang us.
We need to maintain (excess) capacity for...everything.
1. PPE.
2. Vaccine manufacturing
3. IV fluids.
4. Baby formula (?)
5. Drone building (cheap)
6. Hand held missiles (anti-tank, anti-air) (more expensive).
7. Steel.
8. Ship-building.
9. Railroad--tracks, cars, etc.
10. Rockets (as is satellite launches).
11. Chips.
12. Aluminum.
13. etc....
In many cases, there might just be one or two places in the US where key items are made. One hurricane took out one plant site, and about half our IV fluid production was lost. One grossly mis-managed baby formula manufacturing site is closed down because of gross conditions, and severe shortages of specialty formulas.
Consolidations at all levels have made things more efficient, but also very fragile. That doesn't mean prices are cheaper--monopoly and monopsony kicks in. Regan's deregulation and Burke's all mergers are good for consumers have taken us here.
Not sure if the proposed rules for ships will help us much.
Remember, FDR spent years preparing us for WWII, and it took years into the war to fully ramp up. And we relied on our neighbors and allies for supplies. Right now, China dominates in manufacturing output. Any disruption in our ability to buy from them can really hurt us--as was seen with Covid and PPE.
Yes, who cares about living standards when we could simply enjoy ourselves perpetually preparing for war?
THE LINE MUST GO UP!
Maybe we need all of that redundancy. Are you prepared to tell the American public that they need to accept inflation to achieve it?
The threat of inflation is a cudgel used to discipline policy makers that might overwise favor a tighter labor market.
"I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a . 400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody."
--James Carville
Apparently the United States does still build some large oceangoing vessels, but it’s a bit player.
https://crsreports.congress.gov/product/pdf/IF/IF12534
My impression is that setting up a new shipyard capable of building large oceangoing ships is a major undertaking. For one thing; it requires a large plot of land adjacent to the ocean, and I would guess that most such land is already being used for other purposes. So I don’t know how reasonable it is to bring enough more capacity online to handle 5% of U.S. exports by 2032. Ships contain a lot of steel, so Trump’s tariffs on steel won’t help the U.S. shipping industry become price competitive with foreign builders.