Shipbuilding Mandates Under the Jones Act Quadruple Domestic Freight Costs, Channeling Coastal Commerce Onto Overcrowded Interstate Highways

A standard commercial container ship ordered from an Asian shipyard today costs roughly $75 million to construct. The exact same vessel, built in a Philadelphia shipyard to comply with United States domestic shipping laws, carries a price tag of $330 million. That staggering capital premium is not a market anomaly, but a deliberate policy choice.[1]

Under Section 27 of the Merchant Marine Act of 1920, commonly known as the Jones Act, any cargo moved between two American ports must travel on a specific class of vessel. The law mandates that these ships be built entirely in the United States, owned by American citizens, and operated by American crews.[3]

The legislation was originally drafted after World War I to protect the domestic maritime industrial base and ensure a robust merchant marine for national defense. A century later, the mandate has achieved the exact opposite of its intended effect. By shielding American shipyards from global competition, the law destroyed their incentive to innovate.[1][4]

Today, constructing a large merchant vessel in the United States costs four to five times the competitive world price. Because the capital requirements are so punitive, American shipping companies simply stopped buying new boats. The domestic oceangoing fleet has subsequently collapsed.[1]

As of 2024, the United States Department of Transportation counted exactly 92 oceangoing, Jones Act-compliant vessels remaining in service. That represents a 52 percent decline since the year 2000, leaving the world's largest economy with less than one percent of the global commercial fleet legally permitted to move its domestic freight.[3]

The Highway Spillover

When maritime shipping becomes mathematically unviable, the freight does not disappear. It simply migrates to the next available mode of transport, which in the United States means the interstate highway system. The shipbuilding mandate effectively acts as a massive subsidy for the trucking industry.[2][4]

Water transport is inherently the most efficient method for moving heavy cargo over long distances. In the European Union, roughly 40 percent of internal freight travels over the ocean or through inland waterways. In the United States, that figure sits at a dismal two percent.

The missing 38 percent is currently sitting in gridlock on American roads. The Maritime Administration estimates that inflated shipping costs force producers to rely heavily on trucks and trains. This dynamic contributes to a national traffic congestion crisis that costs the economy $200 billion annually.[3]

The Northeast corridor offers the starkest example of this forced inefficiency. The region hosts six of the ten most congested roads in the country, with Interstate 95 routinely choked by heavy freight traffic. Moving that cargo onto coastal vessels sailing parallel to the highway should be an obvious logistical solution.[2]

Yet maritime entrepreneurs who have attempted to launch coastal shipping services repeatedly hit the same regulatory wall. When industry veterans recently designed a low-emission roll-on/roll-off ship to carry 80 freight trailers at a time along the East Coast, the project was immediately killed by the U.S.-build requirement.[2]

The vessels would have cost $65 million to construct in European shipyards, making the coastal freight service highly competitive with trucking. Forced to build in America under the Jones Act, the price doubled, rendering the entire business model cost-prohibitive. The ships were never built, and the trailers remained on Interstate 95.[2]

Quadrupling the Cost of Commerce

The scarcity of legal vessels hands the surviving Jones Act carriers immense pricing power. With only 92 ships available to service the entire domestic market, carriers can charge rates up to ten times higher than international vessels running similar routes. This is a captivity tax levied directly on American consumers.

The economic damage is most visible in noncontiguous states. A 2020 economic analysis found that the Jones Act costs the Hawaiian economy roughly $1.2 billion every year. The U.S.-build requirement alone adds an estimated $500 million to the state's annual shipping costs, inflating the price of everything from groceries to construction materials.

Alaska and Puerto Rico face similar economic penalties. Because foreign vessels are legally barred from moving goods between the mainland and these territories, local businesses pay exorbitant freight premiums. The resulting inflation acts as a regressive tax on the most isolated American communities.

Energy markets suffer from the same artificial bottlenecks. Moving crude oil from the Gulf Coast to refineries in the Northeast on a Jones Act tanker costs up to $6 per barrel. Shipping that same oil on a foreign-flagged vessel to a Canadian refinery costs just $2 per barrel.

Consequently, it is often cheaper for East Coast refineries to import petroleum from West Africa or Saudi Arabia than to buy it from Texas. The domestic shipbuilding mandate actively discourages domestic energy consumption. It forces American buyers to rely on foreign supply chains simply to secure affordable transport.[1]

The protectionist framework also actively hinders the deployment of next-generation energy infrastructure. Offshore wind developers require highly specialized turbine installation vessels to construct maritime power grids. Because these ships must be built in America to operate between U.S. ports, wind projects face crippling delays and massive cost overruns.[1]

The National Security Paradox

Defenders of the status quo consistently rely on a national security justification. The domestic maritime industry argues that the U.S.-build requirement strengthens military readiness at zero cost to the federal government. They claim it ensures a steady supply of shipyards and mariners available for wartime mobilization.[3][4]

The United States Navy has historically supported this position, warning that repealing the law would hamper America's ability to meet strategic sealift requirements. Industry lobbying groups point out that the 40,000 total Jones Act vessels—a figure heavily padded by inland barges and tugboats—support nearly 500,000 American jobs.[3]

"I can't afford a lot of $600 million ships," former Navy Secretary Richard Spencer noted regarding the inflationary effect of domestic maritime mandates. The staggering capital requirements have crippled both commercial and military procurement strategies.[5]

A maritime industrial base cannot be sustained by a law that prevents ships from being built. In 2022, American shipyards produced exactly five commercial ships for the global market. During that same twelve-month period, shipbuilders in China delivered 1,734 commercial vessels.

The disparity in production scale has severe strategic implications. Asian shipyards benefit from streamlined production processes, standardized designs, and massive economies of scale. American yards, insulated from competition and surviving on a trickle of captive domestic orders, have fallen decades behind in manufacturing efficiency.[1]

By making vessels too expensive to purchase, the Jones Act has hollowed out the very merchant marine it was designed to protect. The military cannot requisition ships that do not exist. It also cannot rely on a commercial shipbuilding sector that has lost all capacity to produce large vessels at scale.[1]

A Path Toward Reform

Fixing the coastal freight crisis does not require abandoning the domestic maritime industry entirely. Economic reformers have proposed targeted exemptions that would preserve the U.S.-crewed and U.S.-flagged requirements while eliminating the catastrophic U.S.-build mandate. This compromise addresses both commercial and strategic concerns.[4]

One recent legislative proposal suggests allowing American shipping companies to purchase vessels from allied nations, such as Japan or South Korea. These countries boast world-class maritime industries and deep national security alignment with the United States. They offer a reliable supply of affordable, high-quality ships.

Allowing American carriers to buy $75 million container ships from allied yards would instantly revitalize the coastal shipping market. A sudden influx of affordable vessels would finally make maritime freight competitive with trucking. This would pull thousands of heavy trailers off the interstate highway system.[1][2]

The environmental benefits of such a shift would be massive. Ocean freight is significantly more carbon-efficient than land transport. Diverting cargo from Interstate 95 to the Atlantic coast would drastically reduce greenhouse gas emissions while simultaneously lowering highway maintenance costs for state governments.[2]

Furthermore, a revitalized coastal shipping sector would create thousands of new jobs for American mariners. If domestic carriers could afford to dramatically expand their fleets using allied-built ships, the demand for U.S. captains, engineers, and deckhands would surge. This would genuinely strengthen the maritime workforce.[2][4]

The current regulatory framework represents a profound failure of industrial policy. By attempting to protect a handful of domestic shipbuilders from global competition, the federal government has inadvertently crippled the national supply chain. It has imposed a massive hidden tax on domestic commerce.[1]

The United States possesses the most extensive network of navigable coastal waters in the world. Until Congress acknowledges that a $330 million price tag for a standard cargo ship is an economic dead end, those waters will remain empty. Meanwhile, American highways will remain parked in gridlock.[1][2]