U.S. President Donald Trump has authorized foreign shipbuilders that invest in American shipyards to build up to two vessels at their home shipyards and deliver them to the United States. The move has raised expectations that South Korean shipbuilders will effectively take on construction of U.S. Navy warships, coming as Washington has been asking Seoul about its shipbuilding capacity.
Trump directed on the 13th that foreign shipbuilders investing in the United States be allowed to build two U.S. Navy vessels at shipyards in their home countries, according to the government and the shipbuilding industry on the 16th. In a memorandum signed that day, Trump said the measure applies to foreign shipbuilders that "simultaneously build a new shipyard in the United States or acquire ownership or a majority stake in an existing U.S. shipyard."
The vessels eligible for home-country construction are limited to three types: surface combatants, consolidated cargo replenishment tankers, and roll-on/roll-off cargo ships. Notably, Hanwha, which acquired the Philly Shipyard in Philadelphia, meets the stated conditions. Trump said that "all vessels after the first two must be built in U.S. shipyards."
One of the three vessel classes is surface combatants, which can perform anti-submarine warfare, surface warfare and fleet escort missions. Specific procurement methods are to be worked out in consultation with the Secretary of the Navy. The other two are CONsolidated Cargo Replenishment at Sea (CONSOL) tankers and roll-on/roll-off vessels.
The other two vessels are also non-combatant ships for the Navy. Trump called for the submission of "a plan to direct funds pledged in various trade agreements led by the Secretary of Commerce and the U.S. Trade Representative (USTR) on behalf of the President toward investment in the U.S. maritime industrial base." This connects with MASGA, a $150 billion shipbuilding cooperation project underway under the South Korea-U.S. trade agreement.
Until now, the U.S. naval vessel market has effectively required domestic construction, leaving South Korean shipbuilders facing significant barriers to entry despite their advanced technology and production capacity. Under this measure, however, foreign shipbuilders that invest in the United States can now build initial orders at home until their local shipyards develop sufficient production capacity.
For South Korean shipbuilders, this creates a foundation to supply U.S. vessels by drawing on their strong domestic construction competitiveness while preparing for local production in the United States. They must also meet conditions such as hiring and training Americans and building local supply chains. The U.S. Department of Defense is expected to draw up specific procurement plans within 90 days.
Trump described the measure as following the "Finland model," an arrangement made with Finland last October for building medium-sized icebreakers. The intent is to quickly secure initial vessels overseas while bringing the technology and production methods of foreign shipyards into U.S. yards to restore domestic competitiveness. He also directed the Secretary of Defense to submit a vessel procurement plan within 90 days of the memorandum taking effect.
Hanwha is expected to benefit the most. Hanwha Ocean (042660.KS) acquired the Philly Shipyard in Philadelphia last year, securing a local production base. It plans to invest an additional $5 billion in the shipyard to expand annual construction capacity to 20 vessels. If the measure is realized, Hanwha will establish a business model in which it builds initial orders in South Korea and produces subsequent orders at the Philly Shipyard.
