August 5, 2026 | Benjamin Zycher

Section 27 of the Merchant Marine Act of 1920 — the Jones Act — requires that cargo transported between U.S. ports be carried on vessels that are built in the U.S., owned by U.S. firms, flagged as U.S. vessels and crewed primarily by U.S. citizens. 

The ostensible goal of this law was to support the U.S. shipbuilding industry as a national security imperative. It was intended to preserve long-term investment incentives for domestic shipyards, repair facilities, skilled workers and a ship fleet and mariners that can support military supply needs.

But the actual outcomes yielded by the Jones Act are very different.

Among the top 20 shipbuilding countries in 2025, the U.S. produced about 25,000 gross tons, or .03 percent of global tonnage,. Only Croatia produces less.

It is simply a reality that U.S. shipbuilding costs are three to four times higher than those overseas. In 1950, there were 434 Jones Act-eligible oceangoing vessels of at least 1,000 gross tons. In the time since, this number has collapsed to just 93 ships in 2026, despite the American economy growing tenfold in inflation-adjusted terms during the same period. 

Accordingly, the national security and industrial base benefits of the Jones Act are deeply dubious; it is little more than a special-interest subvention for about five domestic shipyards.

But the Jones Act distorts domestic shipping substantially, with great economic damage as a result, particularly in the energy sector. It is difficult to ship petroleum products refined in Gulf Coast refineries to the East Coast; instead, because of the Jones Act, it often is cheaper simply to import fuels from other countries, even despite greater risks of supply disruptions. 

With respect to liquified natural gas — a growing source of American national wealth — only one liquified natural gas tanker meets Jones Act requirements. That vessel is foreign-built and restricted to serving Puerto Rico under a special exemption. This means that it is actually illegal to ship U.S. natural gas from the Gulf Coast to consumers in New England. Can anyone believe that this system is rational?

With the sharp increase in energy costs attendant upon hostilities with Iran and the Strait of Hormuz, the Trump administration was forced last March to issue a temporary waiver of the Jones Act. Yes, energy security and cost considerations have resulted in a suspension of a law ostensibly intended to increase maritime security.

Such ironies are the fruits of government meddling in markets. The waiver has been extended twice, now through Aug. 16, and the administration is considering a third extension. But important voices in Congress — including prominent Republicans — are demanding that no more waivers be issued, demonstrating the essential role of the Jones Act in protecting special interests rather than economy as a whole.

A denial of an additional waiver would be perverse. The economic benefits of the recent waivers have been important even over the short period since March. They have opened domestic energy shipping routes to a much larger supply of ocean tankers, yielding greater flexibility in terms of market responses to shifting conditions, and thus increased resilience in the face of adverse weather events or refinery outages. 

The waivers have also facilitated an increase in the efficiency of crude oil distribution among U.S. refineries geographically. And the reduction in transportation costs is a welcome offset to the increase in crude oil costs beginning last February and continuing over the foreseeable future.  

The obvious appropriate short-term policy would be approval of a third waiver, combined with an announcement that more such waivers will be approved as long as crude oil prices remain above the levels that prevailed before hostilities began in the Middle East. 

The longer-term appropriate policy would be a concerted effort to enact legislation repealing the Jones Act once and for all. It has never served its ostensible purposes, it creates perverse economic effects and it encourages not investment but endless rent-seeking by innumerable special interests.