Shipping Interruption in Persian Gulf Is Yet Another Reminder of the Risks of Offshoring

There is a zeal among “free traders” and globalists for the United States to be an import-dependent country relying on the rest of the world for both raw materials and finished manufactured goods. This massive offshoring allegedly benefits American consumers with lower prices, because cheap foreign labor avoids both the cost of American labor and the restrictions of western labor laws.

Those of us arguing in favor of tariffs and rebuilding America’s industrial independence reject the premise of the free traders for economic reasons as well as for national security reasons. But there is another important reason to reject the idea of the U.S. being heavily reliant on imports, specifically because the world is a fraught place with shipping chokepoints and prone to outbreaks of war. The globalist utopia of a peaceful, one-world market does not exist.

With the United States and Israel finally putting an end to 47 years of Iranian terror-sponsorship, the Persian Gulf has become a war zone, and the Strait of Hormuz has become a perilous sea route. Accordingly, insurers of ocean liners have suspended insurance coverage for ships passing through the strait, which has effectively shut down all shipping.

From a Financial Times story dated February 28, “Insurers told ship owners on Saturday they would cancel policies and raise coverage prices for vessels travelling through the Gulf and Strait of Hormuz after the U.S. and Israel attacked Iran.” This story also stated that when shipping resumes, the cost to insure a hypothetical $100 million ship will increase from $250,000 to $375,000 per voyage, a 50 percent increase. (RELATED: Five Quick Things: The Grand Senate Bargain?)

According to a subsequent article in maritime publication gCaptain.com, insurers are also canceling policies for ships in the eastern Mediterranean because of missiles being hurled at Israel.

This shipping shutdown is yet another in a series of shipping impediments over the past six years. “Supply chain problems” became a cliché for an endless number of shortages and price hikes in the early post-COVID era. At the same time, shipping prices shot up dramatically, with containers from Asia to the U.S. West Coast increasing to about $20,000 per container from $2,000 pre-COVID.

About the time foreign supply chains were starting to become reliable again, and with the cost of trans-oceanic shipping finally settling back down, a new problem arose. In early 2024, the flow of ships through both the Suez Canal and Panama Canal was suddenly throttled. As documented in a 2024 analysis from a manufacturing industry advisor titled, “Simultaneous Obstructions to the Suez and Panama Canals Threaten the Global Supply Chain:”

• About 15 percent of global shipping traffic passes through the Suez Canal each year, but the flow decreased dramatically when Houthis started attacking ships in the Red Sea.
• About 40 percent of all U.S. container traffic passes through the Panama Canal, but low water levels due to a drought forced a 36 percent cut in the number of ships that could traverse the canal.

Global shipping relies on all three of these critical chokepoints (Hormuz, Suez, Panama) operating at full capacity at all times, yet all three have had shipping impediments in the past three years. It is economic folly for the United States economy to be reliant on these waterways always operating seamlessly. Reckless idealism about global trade has blinded too many people to the risk of having an import-dependent economy.

Above and beyond these problems, there is the China issue.

China already controls the South China Sea, with bases on the Spratly Islands between Vietnam and the Philippines. It also patrols the Yellow Sea (between China and Korea) and the Sea of Japan (between Korea and Japan). What this means is that China effectively controls the Asian coast from Russia to Malaysia, boxing in South Korea and Vietnam, and is obviously capable of blockading Taiwan. Should war break out in some form involving China, it could blockade most of Asia’s Pacific coastline. With the U.S. so dependent on Asia for everything from critical minerals to semiconductors, that would be devastating.

Circling back to the current shipping problem in the Strait of Hormuz, President Trump just announced that the U.S. Navy might start escorting ships through the Strait of Hormuz, and that he was going to make maritime insurance available for the Persian Gulf through the U.S. International Development Finance Corporation.

These actions are certainly warranted at this time, as it is critical to keep sea lanes open. But these actions will also be expensive. In the discussion about using tariffs to reshore American manufacturing, the free traders have a favorite buzzphrase: “Tariffs are a tax on consumers.” Perhaps. But maintaining a military also involves taxing American consumers.

If tariffs are a tax on consumers, so is the cost of military protection for products being shipped from overseas, and so is government-backed maritime insurance. “Free trade” is not free if it requires the U.S. military to keep shipping lanes open.

The utopian ideal of one peaceful, global market does not exist and cannot exist. The various chokepoints that keep getting choked off prove the recklessness of having the U.S. so dependent on foreign imports. This recent shipping interruption in the Strait of Hormuz is another reminder of why economic independence is so necessary. We’d be in a perilous situation if the U.S. hadn’t become energy independent. There is no excuse for the United States to be dependent on anything that can be sourced or manufactured domestically.

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