China Strikes Back: Hanwha Ocean Subsidiaries Caught in the Crossfire of U.S.-China Shipbuilding Tensions
HONG KONG — In a bold move signaling the growing friction between Beijing and Washington, China’s Ministry of Commerce announced on Tuesday that it is banning Chinese companies from doing business with five subsidiaries of South Korea’s Hanwha Ocean. This decision marks the latest escalation in China’s response to U.S. President Donald Trump’s push to revitalize the American shipbuilding sector.
But here’s where it gets controversial: China isn’t stopping there. The ministry also revealed that it is scrutinizing a U.S. investigation into China’s dominance in global shipbuilding and warned that further retaliatory actions could follow. Beijing claims that the U.S. probe threatens China’s national security and its shipping industry, singling out Hanwha Ocean for its involvement in the matter.
The U.S. Trade Representative initiated the Section 301 trade investigation in April 2024, concluding that China’s overwhelming strength in shipbuilding puts U.S. businesses at a disadvantage. "China just weaponized shipbuilding," said Kun Cao, deputy CEO at consulting firm Reddal. "Beijing is sending a clear message: any third-country companies aiding Washington in challenging China's maritime dominance could face consequences."
This development adds another layer to the already tense relationship between the U.S. and China in international shipping and shipbuilding. Just this week, both countries implemented new port fees targeting each other’s vessels, intensifying the economic tug-of-war on the high seas.
South Korea and the U.S. have been strengthening their shipbuilding partnership in response to China’s status as the world’s leading shipbuilder. In a significant move in late 2024, Hanwha Ocean purchased the Philly Shipyard in Pennsylvania for $100 million, signaling its commitment to expanding U.S.-based shipbuilding capabilities. The company later announced plans to invest $5 billion in new docks and quays, supporting the U.S. strategy to restore a globally competitive shipbuilding industry.
Hanwha Ocean has also secured contracts with the U.S. Navy for maintenance, repair, and overhaul of naval vessels. Responding to China’s announcement, the company stated via email that it is "closely reviewing potential business impacts." Following the news, Hanwha Ocean’s shares in South Korea fell sharply, dropping more than 8% during trading and closing down 5.8%.
South Korea’s Foreign Ministry indicated that it is assessing the sanctions’ potential effects on Hanwha and the broader South Korean industrial sector. The ministry emphasized that it will coordinate with relevant government agencies, industry representatives, and the Chinese authorities to mitigate any adverse consequences.
The Chinese sanctions specifically target Hanwha Shipping LLC, Hanwha Philly Shipyard Inc., Hanwha Ocean USA International LLC, Hanwha Shipping Holdings LLC, and HS USA Holdings Corp.
A fragile truce in the trade conflict between the world’s two largest economies seems to be unraveling. President Trump has threatened a new 100% tariff on Chinese imports in response to China’s recent export controls on rare earth elements, raising uncertainty over whether a planned meeting between Trump and Chinese leader Xi Jinping will proceed. Despite the escalation, Beijing reported that working-level talks were held on Monday, maintaining a line of communication with the U.S.
China’s new port fees target vessels owned or operated by U.S. entities, including ships with at least a 25% U.S. stake, vessels flying the U.S. flag, and ships built in the United States—mirroring aspects of U.S. port fees on Chinese ships. While U.S. companies control only 2.9% of global fleet capacity and 0.1% of shipbuilding tonnage, Trump has been determined to rebuild the American industry as part of his broader manufacturing agenda.
Currently, China produces over half of the world’s new ships, with South Korea contributing about 30% and Japan just above 10%. Hanwha Ocean has already signaled a shift away from China, announcing in May its withdrawal from a joint venture in the country.
This clash over global shipbuilding raises provocative questions: Is Beijing justified in targeting foreign firms assisting U.S. efforts, or is this an overreach that could backfire? And for nations like South Korea caught in the middle, how should they navigate this escalating tension? Share your thoughts in the comments below—where do you think the line should be drawn?
