Jones Act Infrastructure Trap

The core law

The Jones Act, part of the 1920 Merchant Marine Act, requires that goods shipped between two US domestic water points travel on ships that are American-built, American-owned, and American-crewed. This applies to any freight movement between two domestic points by water: mainland to Hawaii, mainland to Alaska, mainland to Puerto Rico or Guam, and any inland waterway movement. What was intended to protect domestic shipbuilding has instead produced a multi-part infrastructure trap: it made domestic water routes prohibitively expensive, failed to preserve a competitive shipbuilding industry, and, compounded by port union cartel mechanics, blocked the automation investment that would make US ports globally competitive.¹

The price consequence

Shipping a container from the US West Coast to Hawaii costs roughly 20 times more than shipping a container from the US West Coast to China. Jones Act ships are expensive to build and operate and the compliant fleet is tiny; the largest Jones Act container ships run around 3,000 twenty-foot-equivalent units and cost roughly 270 million dollars each, while the same 270 million dollars buys a 25,000 unit vessel from Korea, Japan, or China. US shipbuilding is not remotely cost-competitive at scale, so the compliant fleet stays small, supply stays constrained, and prices stay high. The United States essentially has no remaining competitive shipyards; former Navy shipbuilding sites around San Francisco Bay are now tourist destinations rather than working yards.¹

A protection that failed on its own terms

The law was designed to protect American shipbuilding, but American shipbuilding no longer exists at meaningful scale, so the protection failed on its own terms, leaving the cost burden without the intended benefit. The stakes are not purely economic: the US Navy has struggled to replace its nuclear submarine fleet, and a program to replace part of the destroyer fleet with littoral combat ships also failed. Some domestic shipbuilding capacity likely does make strategic sense for national security, but using Jones Act economics to punish exporters is not the path toward actually building it.¹

The Mississippi River underuse

The United States has roughly twice as many navigable rivers as the rest of the world combined, and the Mississippi River network connects the country's interior to the Great Lakes and the Saint Lawrence Seaway, a potential freight artery linking most of central North America to export ports. This network is barely used for containerized freight, for two compounding reasons. Domestic water freight between two US points must use Jones Act ships, and few operators run that route at viable economics. And the International Longshoremen's Association, which represents East Coast and Gulf Coast ports including the Mississippi network, charges a high touch fee every time a container is loaded or unloaded, which makes river barge transport non-competitive with trucking for containerized goods. The result is that freight that could move cheaply by barge instead goes by truck, leaving world-class inland waterway infrastructure underused because of compounding regulatory and contractual obstacles.¹

The port union cartel

The trap extends beyond domestic shipping into port automation. Two employer groups, one covering the East and Gulf coasts and one covering the West Coast, coordinate all employer-side bargaining as a single entity against the dockworkers' union, creating a clean one-to-one negotiating structure. A blacklisting provision inside that agreement means that if a shipping company calls at a non-union port, its ships are contractually barred from calling at every other port in the union-affiliated network, which means operating a non-union port would require simultaneously opening multiple ports and running one's own fleet of ships, a multi-billion-dollar barrier that no realistic new entrant can clear. Most port land is also owned by local governments and subleased to operators, and local governments will not sublease to a non-union operator, reinforcing the cartel at the municipal level. Both port operators and ocean carriers are largely comfortable with the resulting status quo: if nobody automates, everyone's cost structure stays equal and the costs simply pass through to consumers, so there is no competitive pressure to automate once the equilibrium has been locked in by contract.¹

The export harm paradox

The deepest critique draws on South Korea's manufacturing success. Countries that successfully built manufacturing bases, South Korea's shipbuilders and electronics makers among them, succeeded because they forced domestic manufacturers to compete globally through export promotion rather than only shielding them from imports; countries that protected domestic manufacturers only from imports, without also demanding export competitiveness, built coddled and uncompetitive industries instead. Current US policy layers high import tariffs, proposed mandatory US-ship export requirements, high port fees on foreign-flagged ships, and the Jones Act on domestic routes, hitting both imports and exports at once, which is close to the worst possible combination if the actual goal is competitive domestic manufacturing: "If we're putting up barriers to export it's just like doing it completely wrong. You're trying to create a manufacturing base, you need to actually make it globally competitive, not just ride off the fact that we have this great consumer base in the US."¹

A proposed fix

The suggested reforms are to keep reciprocal tariffs as leverage to negotiate lower barriers on both sides rather than as permanent walls, relax the Jones Act for inland waterways at minimum to allow foreign-flagged vessels on the Mississippi network, reform or remove the touch fees that make river barge transport non-competitive with trucks, and pursue port automation by bringing software talent to build a modern controller layer for existing port crane hardware rather than buying multi-billion-dollar automation systems outright, since the cranes themselves do not need replacing. The proposal is explicitly not to eliminate unions, but to remove the specific mechanisms, the touch fee and the blacklisting provision, that harm everyone sitting outside the negotiating table.¹

Connections

The Jones Act and the port union cartel create domestic choke points structurally similar to the foreign maritime straits that global freight forwarders already monitor closely. The Jones Act is also one of several layers of trade policy compounding into an unpredictable cost structure for US businesses more broadly. And the same underlying dynamic, a well-organized small group extracting value from an unorganized larger group with no one representing the rest at the negotiating table, recurs in tariff fraud as well.