South Korea Bets on Ship building for Trade Edge

As South Korea prepares for trade negotiations with the United States next week, officials in Seoul believe they hold a key bargaining chip: the country's dominant shipbuilding industry. With President Trump prioritizing the revival of American maritime industries, South Korea aims to use its expertise in shipbuilding to ease potential trade restrictions on its exports, including automobiles, steel, and household appliances.

South Korea, the world's second largest shipbuilder after China, sees an opportunity to align with Trump's ambitions to strengthen U.S. naval and commercial shipbuilding. In exchange, Seoul hopes to mitigate the impact of a proposed 25 percent tariff on key South Korean exports, such as Hyundai and Kia vehicles, steel, aluminum, and LG dishwashers. Both nations have indicated that shipbuilding will be a central component of any revised trade agreement.

South Korea's Trade and Industry Minister Ahn Dukgeun recently told Parliament that cooperation in shipbuilding could serve as a crucial negotiating tool. "Since President Trump and his administration have expressed big interest in cooperation in shipbuilding, it will become a very important negotiating card for us," he said. The country's Finance Minister Choi Sangmok is also expected to meet with U.S. Treasury officials next week to discuss economic ties.

Unlike China and the European Union, South Korea has avoided retaliatory tariffs and instead pursued diplomatic engagement. Acting President Han Ducksoo emphasized the importance of strengthening the alliance, stating, "It is a wiser solution to elevate the South Korea U.S. alliance to a stronger security and economic alliance."

The U.S. has increasingly looked to allies like South Korea and Japan to bolster its shipbuilding capabilities, particularly as China dominates global commercial ship production with 74 percent of the market. The U.S. accounts for less than 1 percent of commercial shipbuilding, and its naval shipyards have struggled with delays and cost overruns. Meanwhile, China's rapid naval expansion—projected to reach 395 warships by 2025—has raised concerns in Washington.

In response, Trump has vowed to revitalize American shipbuilding, establishing a new Office of Shipbuilding within the National Security Council. A recent executive order proposed incentives for allied shipbuilders to invest in the U.S. while imposing steep docking fees on Chinese vessels to fund domestic shipyard expansion. These measures could benefit South Korean firms by diverting orders away from Chinese competitors.

South Korean companies have already made moves to align with U.S. interests. Hanwha Ocean acquired Philadelphia's commercial Philly Shipyard in a $100 million deal last year, aiming to expand into U.S. Navy contracts. HD Hyundai Heavy Industries, the world's largest shipbuilder, is exploring partnerships with U.S. defense firms, including Huntington Ingalls Industries, to collaborate on advanced warship production.

However, analysts caution that significant hurdles remain. A shortage of skilled labor, regulatory barriers in the U.S. defense sector, and Trump's own tariffs on steel—a key shipbuilding material—could complicate South Korean investments. Some experts also doubt whether executive actions alone can reverse the long term decline of American shipbuilding.

Yoon Sukjoon, a senior fellow at the Korea Institute for Military Affairs, expressed skepticism, stating, "Shipbuilding is just another sector where Trump is twisting an ally's arm." Despite these challenges, South Korea remains hopeful that its shipbuilding expertise will provide a pathway to more favorable trade terms with the U.S.