How an Overvalued Dollar Sank U.S. Naval Power

At the close of World War II, the United States possessed the most formidable maritime industrial base in human history. During the war, the United States launched thousands of vessels that secured global trade routes and projected power across every ocean. Today, that industrial might has virtually vanished. While East Asian shipbuilders—specifically China, South Korea, and Japan—have surged to dominate the seas, American shipbuilding has withered into a fraction of a percent of global output.

The scale of this collapse is staggering. According to U.S. Navy assessments, China now possesses roughly 232 times the shipbuilding capacity of the United States. In other words, for every ship the United States builds, China can make 232 ships. The numbers are astonishing. China is now capable of producing more than 23 million tons of shipping annually compared to less than 100,000 tons in American shipyards.

Together, China, South Korea, and Japan account for over 90 percent of all global commercial shipbuilding tonnage. China alone fulfills well over half of the world’s commercial ship orders. In addition, China just overtook South Korea in orders for complex, high-value vessels like liquefied natural gas carriers. Meanwhile, the United States produces roughly 0.1 percent of the world’s oceangoing commercial fleet—often building fewer than five large commercial ships in an entire year.

This commercial collapse has triggered an acute national security crisis for the United States Navy. Because commercial and military shipbuilding share the same supply chains, dry docks, steel mills, and skilled welders, the death of American commercial yards has crippled the Navy’s ability to build and maintain its fleet. U.S. shipyards suffer from severe maintenance backlogs, multi-year delays, and costs that are four to five times higher than those in East Asia.

Facing a rapidly expanding Chinese naval fleet that already outnumbers American warships, Washington has turned to foreign shipbuilders for help. In recent years, the Pentagon has explored and expanded frameworks to have allied yards in South Korea and Japan repair and maintain U.S. Navy vessels. Even more strikingly, federal initiatives—including recent presidential directives and defense reviews—have moved toward using foreign warship designs and allowing allied shipyards in South Korea and Japan to construct initial hulls for new U.S. Navy surface combatants before transitioning production back to American soil. Simultaneously, South Korean conglomerates like Hanwha and HD Hyundai have stepped in to acquire or partner with struggling American facilities, such as the Philly Shipyard, to modernize U.S. yards that can no longer compete on their own.

While partnering with trusted allies like Japan and South Korea offers a short-term patch, relying on foreign nations to build, design, and repair American warships introduces severe strategic vulnerabilities. Outsourcing naval construction and maintenance exposes critical defense supply chains to geopolitical disruption, espionage, and differing engineering standards. In the event of a major conflict in the Pacific, shipyards in South Korea and Japan would be well within range of enemy missile strikes, and their governments would face immense pressure to prioritize their own national defense over repairing damaged American hulls.

In addition, alliances change over time. The United States was at war with Japan within living memory. If the United States were to go to war with Japan again - God forbid - Japan could sabotage American shipbuilding and maintenance in the Pacific. Japan could also lock machine tools at the U.S. Steel plants that it controls in the United States. In short, a nation cannot safely outsource military industrial capacity to foreigners. Doing so invites the enemy into the castle.

To reverse this dangerous trajectory, policymakers must look past superficial symptoms—such as regulatory red tape or labor shortages—and confront the root macroeconomic cause of America’s industrial decline: a chronically overvalued U.S. dollar.

For more than five decades, the global petrodollar system has required nations around the world to buy and hold massive reserves of U.S. dollars to purchase oil and settle international commodities. While this arrangement grants Washington the "exorbitant privilege" of borrowing cheaply, it creates relentless, artificial global demand for the greenback. That permanent demand keeps the dollar artificially elevated far above the level warranted by America’s actual trade balance or manufacturing competitiveness.

An overvalued currency acts as a massive, hidden tax on American exports and a permanent subsidy for foreign imports. In capital-intensive, globally competitive industries like shipbuilding, currency valuation is decisive. Because the dollar is priced too high relative to the Chinese yuan, the South Korean won, and the Japanese yen, American steel, American labor, and American ships are instantly priced out of the global market before a single keel is laid. No amount of government subsidies or naval waivers can overcome a structural exchange-rate disadvantage that makes domestic manufacturing prohibitively expensive.

If the United States truly wants to rebuild its shipyards, restore its maritime independence, and secure its naval future, it must address the currency distortion at the heart of its deindustrialization. Washington needs to pursue a deliberate, orderly devaluation of the U.S. dollar—whether through a modern multilateral currency agreement modeled on the 1985 Plaza Accord or through unilateral capital and trade mechanisms that curb speculative dollar inflows. Bringing the dollar back down to a competitive equilibrium will finally level the playing field, making it economically viable once again to build, crew, and maintain the ships that keep America secure.

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Elliott J. Schuchardt is the author of America's Achilles Heel: How to Protect Your Family When America Loses the Reserve Currency. In 2026, Schuchardt was a candidate for the Tennessee General Assembly.