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The latest faultline exposed by the war in Iran is maritime trade and security. The blockage of the Strait of Hormuz, coupled with port attacks in Dubai and worries that Houthi rebels could pile in with more attacks in the Red Sea, has brought global shipping in the region, along with the transport of crucial energy supplies, to a grinding halt. In doing so, it has exposed the fact that neither America — nor the world — is yet prepared for how quickly global trade can be compromised in the face of geoeconomic disruption.
It’s amazing to me that we are not ready for this yet, given that we’ve been watching this movie for almost three decades. There was the 1999 Taiwanese earthquake that disrupted chip supply globally and resulted in the closure of factories in California and Texas. There was the Japanese tsunami in 2011 that shut down parts of the global automotive supply chain for months. There were, of course, the many Covid-related supply chain snags, and the food and energy inflation wrecked by the war in Ukraine. And now, President Donald Trump is giving us the mother of all supply chain shocks — this time in oil — with seemingly little forward planning about how to manage the disruption. For all the post-pandemic talk of building economic systems that are resilient as well as efficient, we seem to have got neither right.
Consider the fact that Trump last week was forced to waive the century-old Jones Act, which stipulates that only US-built and flagged ships can carry goods between American ports. It’s been a contentious piece of legislation for a long time now, since the loss of the US industrial base in shipping has diminished economies of scale in American shipbuilding. That has meant that many foreign builders can manufacture ships and run maritime operations more cheaply than the US industry can. Trump hopes to bring down oil and gas prices at least temporarily by allowing foreign vessels to ship goods between American ports, thus making the shipping of such commodities — which have risen sharply in price due to the Iran war — cheaper.
Whether this will do more than shave a few pennies off oil prices is unclear. Still, it has at least reopened debate about the Jones Act. A 2026 white paper from Vanderbilt University on the challenges in shipbuilding notes that “the Jones Act’s protected market cannot drive the industrial resurgence needed for global competitiveness without major overhaul and public investment”. As the authors outline, the act encourages operators simply to repair old ships flagged in the US rather than build new ones, which cost three to eight times what foreign-built vessels might.
Still, they note, a “repeal of the Jones Act offers a short-term gain, while increasing longer-term fragility. Without domestic protection requirements, operators would simply buy cheaper foreign-built (and state-subsidised) ships, leaving the US without a manufacturing base.”
In fact, that’s pretty much what has happened in every area of shipping outside the purview of the act — the industry is now dominated by Chinese ships. Both the Vanderbilt researchers and an Open Markets paper on how to save US shipbuilding argue (and I’d agree) that the real issue is the failure of the government to provide strong demand signals to the industry by underwriting support across years and decades. Ensuring that public and private shipbuilding are reconnected is historically the only way that any country has managed to build a strong navy, commercial maritime sector and ocean defence.
But it’s worth remembering why we have the law in the first place. At the beginning of the 20th century, the US was dangerously dependent on foreign shipping cartels (including those in the UK, which were state subsidised). The monopoly power of such companies drove prices for the shipping of key items up by as much as 20 times. “While there was some justification [during the first world war] for these enormous increases in charter rates, ship costs and freight rates, it was evident that they had been artificially inflated,” according to Edward Hurley, the head of the US Shipping Board at the time.
This very much mirrors the monopoly power exerted today by the world’s largest shipping groups including MSC, Maersk, Cosco, Hapag-Lloyd and the handful of others that control 90 per cent of the global shipping capacity. Thanks to the rise of supertankers and container shipping, fewer, larger boats are carrying most of the world’s goods (90 per cent of which are transported by sea). That’s a system built for “efficiency” rather than resilience — especially in a new age of warfare in which one cheap Iranian drone can take out a tanker in minutes.
If ships are indeed the new chips, as the last two US administrations have asserted, America is going to have to completely rethink the way it incentivises and regulates the building of new vessels. What’s needed are fewer mega tankers and frigates and more nimble, dual-use vessels, perhaps built in conjunction with partners (few countries can build ships completely on their own).
Whether or not that happens, the effective closure of the Strait of Hormuz will further speed up the desire to find new shipping pathways — in the Arctic, for example. In a world of great power conflict, flexibility equals safety.