The Biden administration concluded that China employs unfair policies and practices to dominate the global maritime, logistics, and shipbuilding sectors, according to sources familiar with the findings of a months-long trade investigation. Initiated in April 2024 by U.S. Trade Representative (USTR) Katherine Tai, the probe was launched under Section 301 of the Trade Act of 1974 in response to a petition from the United Steelworkers and four other U.S. unions. This legislation empowers the United States to take action against foreign countries engaging in "unjustifiable" or "unreasonable" acts that burden U.S. commerce.

The investigation revealed that China systematically targets the maritime and shipbuilding industries for dominance through a combination of financial subsidies, barriers to entry for foreign firms, forced technology transfers, intellectual property theft and procurement policies designed to provide a competitive edge. Additionally, the report highlighted China's deliberate suppression of labour costs within these sectors, further distorting global competition. These findings underscore significant challenges to fair trade and equitable competition in critical industries.

The report highlights China's dramatic rise in the global shipbuilding industry, where its share of the $150 billion market surged from approximately 5% in 2000 to over 50% in 2023. This growth has been largely fuelled by extensive government subsidies, which have significantly disadvantaged competitors. In contrast, the once-dominant U.S. shipbuilding industry has seen its share decline to less than 1%. Other major players in the industry, such as South Korea and Japan have also been impacted by China's aggressive policies.

The findings provide a strategic foundation for policy responses to address China's dominance. Potential measures include tariffs or port fees on Chinese-built vessels, as proposed by unions advocating for a level playing field. Such actions would follow a mandatory public comment period, enabling stakeholders to weigh in on the proposed remedies. These measures could serve as a critical tool for future administrations to counteract the trade imbalances and restore competitiveness to the U.S. shipbuilding sector.

"The development of relevant industries in China is the result of technological innovation and active market competition of enterprises, thanks to its complete industrial manufacturing system and huge domestic market," said Liu Pengyu, spokesperson for the Chinese embassy in Washington.

"The U.S. blames China for its own problems, which lacks factual basis and goes against economic common sense."

The report notes that the Section 301 statute has been previously employed to address similar trade concerns. During his first term, former President Donald Trump utilised this provision to impose tariffs on hundreds of billions of dollars' worth of Chinese imports following a USTR investigation that identified China’s misappropriation of U.S. intellectual property and the coercive transfer of U.S. technology to Chinese firms.

According to sources, the current findings under Section 301 will be released publicly later this week. The timing of the release, just days before President Joe Biden concludes his term on January 20, underscores the urgency of addressing China's trade practices and their broader implications for global economic stability.

"China will closely follow the progress of the investigation and ask the U.S. to stop 'generalising security' of economic and trade issues, cancel the tariff increase measures against China, and stop imposing new tariffs," Liu said.

"China will take all necessary measures to resolutely defend its rights and interests."

The report highlights sustained criticism from the U.S. and other Western nations regarding China’s aggressive industrial policies and overproduction of key commodities like steel. These practices have led to a rare bipartisan consensus on the urgent need to revitalise the U.S. shipbuilding industry. While China denies any wrongdoing, the findings emphasise the long-term impacts of its policies on global competition and market dynamics.

Over the past four years, the Biden administration has taken significant steps to counter China's dominance, including maintaining and expanding Trump-era tariffs, introducing new tariffs on sectors such as electric vehicles, and implementing stringent export controls.

Last month, the U.S. Trade Representative’s office launched an investigation into older Chinese-made "legacy" semiconductors, potentially paving the way for additional tariffs on chips integral to products like automobiles, washing machines and telecommunications equipment.

Experts caution that rebuilding the U.S. maritime industry will require a multi-decade effort and investments totalling tens of billions of dollars. While tariffs and trade actions can help level the playing field, they acknowledge that comprehensive strategies encompassing policy reforms, technological advancements, and infrastructure development will be essential to restoring the sector's competitiveness.

"China's targeting of the maritime, logistics and shipbuilding sectors for dominance is the greatest barrier to the revitalisation of U.S. industries in these sectors," the report concludes, according to an excerpt shared with Reuters.

Scott Paul, president of the Alliance for American Manufacturing, a nonprofit labour-business partnership, said he understood that the findings were compelling.

"My understanding is that ... a process will be laid out to try to stop the erosion of our shipbuilding industrial base and to start it growing again," he said, cautioning, "This is not going to be a quick fix."

The report also notes recent statements by former President Donald Trump, who has pledged to increase tariffs on Chinese goods to 60% in response to China's dominance in commercial and military shipbuilding.

In an interview with radio host Hugh Hewitt, Trump emphasised that the U.S. had "suffered tremendously" under China's policies and called for a decisive shift in strategy. He further suggested that the U.S. might need to collaborate with allied nations to meet the demand for naval vessels essential to national security.

Additionally, Trump’s incoming National Security Adviser, Mike Waltz, has been actively engaged in addressing this issue. Before resigning from Congress, Waltz co-authored a bipartisan bill with Democratic Senator Mark Kelly aimed at revitalising the U.S. shipbuilding industry. The proposed legislation underscores the critical need for a united effort to rebuild domestic shipbuilding capabilities and reduce reliance on foreign production.

"We're way too dependent on China in particular. We do not have surge capacity. We have very little shipbuilding capacity, and for a superpower that's completely unacceptable," Paul said.

The U.S. has just 20 public and private shipyards, down from over 300 American shipyards in the early 1980s. Experts say demand is strong and growing for civilian and military vessels.