China has escalated tensions with the United States by placing sanctions on five US subsidiaries of the South Korean shipbuilding firm Hanwha Ocean. This move, announced by China’s Ministry of Commerce, is reportedly in response to the alleged collaboration between these subsidiaries and US efforts to impose punitive fees on Chinese vessels, measures that took effect recently.
The sanctions are part of an expansive investigation into entities believed to support US actions against China’s increasing dominance in the global shipbuilding industry. The Chinese ministry stated that Hanwha’s US units provided assistance to the US government in conducting investigations and implementing measures detrimental to China’s maritime, logistics, and shipbuilding sectors. As a result of these sanctions, shares of Hanwha dropped by as much as 8 percent, reflecting investor concern over the implications of the Chinese government’s actions.
The directive prohibits organizations and individuals operating within Chinese territory from engaging in any transactions or collaborations with Hanwha. This retaliation aligns with broader escalations in the ongoing trade war between Beijing and Washington, which has seen China impose stringent new restrictions on rare earth exports just days prior.
US Treasury Secretary Scott Bessent has expressed serious concerns regarding China’s actions, suggesting that the nation’s extended export controls could ultimately harm its own economy the most. The US sanctions, which apply high fees to Chinese-built or owned ships entering American ports, are designed to bolster domestic manufacturing and address what Washington characterizes as unfair trade practices prevalent in China’s shipping sector.
Despite US companies constituting a mere 0.1 percent of global shipbuilding, analysts point out that Hanwha, having recently acquired the Philly Shipyard in Philadelphia, plays a pivotal role in revitalizing the American shipbuilding market, making it a target for these sanctions. Moreover, Hanwha was the first South Korean shipbuilder to obtain contracts for maintenance, repair, and overhaul work on American naval vessels localized in South Korea.
South Korea’s shipbuilding sector, dominating 29 percent of the global market, has initiated a $150 billion “Make America Shipbuilding Great Again” initiative as part of stalled discussions with the US.
While Hanwha Ocean has refrained from commenting on the recent sanctions, the implications are profound. The escalating conflict has raised alarms among US exporters, particularly as China has countered with measures that could potentially increase costs for agricultural exports linked to American investors.
Further complicating matters, analysts from HSBC have noted that even though the US’s direct involvement in global commercial shipping is minimal, the new Chinese rules could impact third-party vessels linked to American financial entities.
Interestingly, on the same day the sanctions were announced, China’s Ministry of Commerce adopted a more conciliatory tone regarding future trade dialogues, urging Washington to pursue cooperative steps. This dual approach of imposing sanctions while simultaneously advocating for dialogue underscores the complexity of the current geopolitical landscape, as both nations navigate the intricacies of trade relations.
