Two Republican lawmakers, Sen. Mike Lee and Sen. John Curtis, introduced legislation on Feb. 5 that would allow the United States to outsource naval shipbuilding to allied nations, including South Korea. The move marks a significant shift in U.S. policy as it grapples with a declining domestic shipbuilding industry.
Since 1920, the Jones Act has required civilian vessels operating between U.S. ports to be built domestically. Further protections were added in 1965 and 1968 through the Byrnes-Tollefson Amendment, which mandated that U.S. warships be constructed exclusively in American shipyards. However, growing concerns over China’s expanding naval fleet and the weakening of U.S. shipbuilding capabilities have prompted lawmakers to ease these restrictions. With Republican support in both chambers, the bill is expected to pass smoothly.
The proposed legislation could create new opportunities for South Korea’s shipbuilding industry. Among U.S. allies, only South Korea and Japan have the industrial capacity to build naval vessels at scale. After winning the November 2024 election, President Donald Trump highlighted South Korea’s expertise in naval and commercial shipbuilding, stressing the need for close cooperation on maintenance, repair, and exports. Some U.S. media outlets framed this as Washington turning to South Korea for shipbuilding support.
The bill specifies that the U.S. Navy can contract shipbuilding to nations with which the U.S. has a mutual defense treaty or that are NATO members. However, foreign shipyards must offer lower costs than their U.S. counterparts and cannot be owned or funded by China. Currently, South Korea, China, and Japan account for 90% of the global shipbuilding market, meaning only South Korea and Japan qualify under the bill’s terms. Analysts say South Korea stands to benefit the most, given its ability to deliver warships quickly.
While Japan’s shipbuilding industry has declined, with its global market share falling to around 4%, South Korea remains a dominant player capable of delivering large warships on short timelines. For example, HD Hyundai Heavy Industries built the 8,200-ton Aegis-equipped destroyer Jeongjo the Great, which entered service in December 2024. The destroyer reportedly cost half as much as similar Aegis-class ships and was built in one-third of the typical construction time.
South Korea’s shipbuilding capabilities could also serve as leverage in future U.S. trade negotiations. If South Korea plays a key role in U.S. naval expansion, it may help ease American pressure on other Korean industries, such as automobiles, semiconductors, and steel.
According to the Congressional Budget Office, the U.S. Navy plans to expand its fleet from 295 ships in 2024 to 390 ships by 2054, retiring older vessels and introducing 364 new warships. The total cost is projected at $1.075 trillion. If a significant portion of these contracts go to allied shipbuilders, industry insiders expect “an unprecedented new market.”
Even before Trump’s election, South Korean companies had been preparing to expand into the U.S. market. In August 2024, Hanwha Ocean became the first Korean shipbuilder to secure a maintenance, repair, and overhaul (MRO) contract with the U.S. Navy. The company also completed its acquisition of Philly Shipyard in late 2024. Meanwhile, HD Hyundai Heavy Industries plans to triple its naval shipbuilding business to $7.5 billion by 2030.
Investor optimism over the legislation drove up South Korean shipbuilding stocks on Feb. 12. Shares of HD Hyundai Heavy Industries surged 15.36%, Hanwha Ocean rose 15.17%, and Samsung Heavy Industries gained 5.98%.
