As last fall’s presidential election returns reminded us, massive trade imbalances in products ranging from textiles to automobiles to electronics are making Americans conscious of growing weaknesses in the industrial base of America’s heartland.
Coupled with rising geopolitical tensions across the Pacific, Europe’s first major land war since 1945 made leaders of industrial democracies throughout the world increasingly cognizant of vulnerabilities in America’s defense-industrial base.
At this time of great transition and uncertainty in global politics, it is important to focus intently on the defense manufacturing crisis and to consider how the United States got here and what might be done.
In 1950, US manufacturing produced more than half the industrial product of the entire world. In 1960, America’s share was still well over a third. Yet today the American share is less than 16% percent, with the US ranking third as a manufacturing power – behind even Germany, which has a GDP only a third its size.
Importantly, the largest global manufacturer – by a considerable margin – is China, with which the US faces an increasingly confrontational geopolitical relationship and on which America relies heavily for manufactured imports.
The US does remain dominant in some important manufacturing sectors, most importantly aviation – although China is making advances even there.
And the situation is very different in the strategic maritime area, as I point out in my recent book, Eurasian Maritime Geopolitics. Not even 1% of the world’s ships are built in the United States – even including production for the US Navy, which requested 2025 budget funds for only six new ships. About five commercial ships are built in the US annually.
Over 50% of global shipbuilding is in China, the world’s largest producer, with seven of the top ten shipbuilders by order volume being Chinese. The Chinese navy now boasts, by a substantial margin, the largest fleet in the world.
Even more ominously, future US defense-production capacity is eroding when its expansion is greatly needed. The average US Navy vessel today is 19 years old. Of the vessels in China’s navy, by contrast, 70% have been launched since 2010 – and China’s production base is expanding much more rapidly than American.
The situation is similar in shipping and in port development. Three of the top ten shipping companies in the world are Chinese. America’s largest, the Matson Line, is ranked 28th. Similarly, seven of the ten largest ports in the world are Chinese, with China leading the world in computerized container shipping. America’s largest ports, at Long Beach and New York City, rank 22d and 24th respectively.
Some attribute America’s weaknesses in the maritime area to regulatory challenges. The Jones Act, an arcane law requiring that shipping between American ports be in American bottoms, is justified as bolstering national security by strengthening the US shipbuilding and shipping industries – but critics say that overall it has had the opposite effect.
Steel
Equally damaging to US shipping is the broader weaknesses in basic industry. Highest on the list is the US weakness in basic steel. There America’s flagship firm, US Steel, ranks only 28th in global scale.
Much was made, on both sides of the Pacific, of former President Joe Biden’s 2024 veto of Nippon Steel’s bid to acquire US Steel. Although no doubt short-sighted from an economic standpoint, Biden’s stance – similar to that of Donald Trump before his election – was understandable in political terms.
US Steel, after all, is the US industrial flagship firm, founded by Andrew Carnegie in 1903, and headquartered in Pennsylvania, the most consequential US swing state of 2024. In a Presidential election year, with the United Steel Workers of America vehemently opposed – if not many local affiliates – it was not surprising that such an iconic firm would be a lightning rod for protectionist impulses.
Yet amid the heated debate over US Steel’s future course, it is important not to lose sight of the truly crucial national-security issue: the future of America’s defense industrial base.
Donald Trump’s historic May, 2025 reversal – to support Nippon Steel’s acquisition, on condition of $14 billion in added investment; an all-American board of directors; and continuation of the US Steel name and Pittsburgh headquarters – was an important step forward in that regard.
Reviving America’s steel, shipbuilding, shipping, precision-machinery, and capital-goods manufacturing sectors, to name a few, will be a crucial imperative in coming years, given the challenge of China and other competitors. And steel-industry revival will be fundamental to basic-industry revival more generally – not least on the seas. Such Technology and capital, provided largely by the private sector, supported by plausible market dynamics, will be crucial imperatives.
Tariffs alone cannot possibly revive American maritime manufacturing. Particularly in the maritime sectors, and potentially in steel and some machine-building sectors as well, democratic allies will almost inevitably be a primary source of both technology and capital, as well as production volume.
Strategic advantage in these basic sectors, after all, accrues to those who operate at scale. And China today in the maritime sectors has scale. The US needs its allies to help achieve that, and to move toward integrated capacity at optimal scale. In an era of potentially protracted conflict, as the experience of the Ukraine war suggests, production scale and capacity are looming larger than heretofore.
Japan and Korea
Apart from China, the largest and most productive shipbuilders in the world are all in Japan and South Korea, supplied by their own productive, efficient steel sectors. Their expertise and investment will almost certainly be crucial to the revival of the US maritime industrial base.
Indeed, that process has already begun. In 2024 Japanese and South Korean firms agreed to repair US Navy vessels and in December a Korean firm acquired and began rebuilding the Philadelphia Naval Shipyard, which produced some of the US Navy’s most powerful capital ships during World War II.
Moving to the future, both sides of the Pacific need to build on lessons of the US Steel case – especially the importance of trans-Pacific cooperation in the rebuilding of America’s defense-industrial base. Governments themselves need to take a longer view, and to grasp the vital importance to national security of cooperation among allies that does not compromise sovereignty or deeply held values.
With the transition to leadership in Washington, and major trans-Pacific summits impending, now is the time both to learn from the past and to let partners play a role in helping to make American manufacturing great again.
Kent Calder is Director of the Reischauer Center for East Asian Studies at Johns Hopkins University SAIS, former Special Advisor to the US Ambassador to Japan and the recent author of Eurasian Maritime Geopolitics (Brookings, 2025).
