HONG KONG: China's Commerce Ministry said this week that it is banning Chinese companies from doing business with five subsidiaries of South Korean shipbuilder Hanwha Ocean. The move is seen as Beijing's response to U.S. President Donald Trump's push to rebuild America's shipbuilding industry.

The ministry also said it would investigate a U.S. probe into China's dominance in global shipbuilding and warned of more retaliation. It argued that the U.S. investigation threatens China's national security and its shipping sector, noting Hanwha's involvement in the U.S. case.

The U.S. Trade Representative began the Section 301 trade investigation in April 2024, saying that China's power in shipbuilding was hurting American companies.

"China just weaponized shipbuilding," said Kun Cao, deputy chief executive at consulting firm Reddal. "Beijing is warning that it will target companies helping the U.S. counter China's control of the seas."

Shipbuilding has become another flashpoint in the growing tensions between Washington and Beijing. Both sides have now imposed new port fees on each other's ships, effective October 14.

South Korea and the U.S. have been strengthening cooperation in shipbuilding to reduce reliance on China, which remains the world's largest shipbuilder. In late 2024, Hanwha Ocean bought Philly Shipyard in Pennsylvania for US$100 million and later announced plans to invest $5 billion in new facilities to support U.S. shipbuilding efforts.

Hanwha also has contracts with the U.S. Navy to service and repair naval ships. The company said it is reviewing the impact of China's decision on its business.

Hanwha's shares in South Korea fell more than eight percent on October 14 before closing 5.8 percent lower.

South Korea's Foreign Ministry said it is studying how the Chinese sanctions might affect Hanwha and related industries and will work with the Chinese government and local businesses to limit the damage.

The five banned subsidiaries are:

• Hanwha Shipping LLC
• Hanwha Philly Shipyard Inc.
• Hanwha Ocean USA International LLC
• Hanwha Shipping Holdings LLC
• HS USA Holdings Corp.

The trade dispute between China and the U.S. has intensified again after President Trump threatened 100 percent tariffs on Chinese imports, reacting to China's new export controls on rare earth materials.

Rising tensions have cast doubt on a planned meeting between Trump and Chinese President Xi Jinping later this month. Still, China said both countries held talks on Monday and are keeping communication open.

China's new port fees apply to U.S.-owned or operated ships, ships with at least 25 percent U.S. ownership, vessels flying the U.S. flag, or ships built in the U.S. — mirroring U.S. fees on Chinese ships.

Currently, U.S. companies own just 2.9 percent of the world's shipping capacity and produce only 0.1 percent of global shipbuilding tonnage. Trump has pledged to revive U.S. shipbuilding as part of his plan to expand American manufacturing.

China builds over half of the world's new ships, followed by South Korea with about 30 percent and Japan with a little over 10 percent.

In May, Hanwha Ocean announced it was pulling out of a joint venture in China.