The Jones Act Waiver Two Months In: What It Tells Us About the Costs of Unnecessary Regulation

The Jones Act, which restricts cargo shipments between US ports to US-flagged and owned vessels, has distorted the US transportation system for over a century. Nevertheless, until now there has only been limited information about the law’s precise impacts on US firms and households. Some indirect evidence comes from work by Vincent H. Smith, Philip G. Hoxie, and Stephanie Mercier on a similar cargo preference mandate’s impact on international food aid shipping costs. Freight rates have been 60–100 percent larger for food aid shipments carried by US vessels under the cargo preference mandate than on foreign vessels because shipments open to all carriers involve far more competition. Almost surely, the Jones Act has likewise increased freight rates along the routes to which it applies. When the Trump administration issued a Jones Act waiver on March 17, 2026—the longest since 1950 (Figure 1)—it created a “natural experiment” that allows us to gauge the law’s effects. The waiver, initially for 60 days and subsequently extended by 90 more, covers over 650 product categories (including natural gas, crude oil, and jet and other fuels) and gives commercial shippers enough time to respond to a regulatory environment in which they can commission domestic cargo shipments on foreign-flagged vessels. Figure 1: Recent Jones Act Waivers by Length of Waiver (1991–2026) Source: Scott Lincicome, Bloomberg, “Defenders of the Jones Act Have Lost,” May 7, 2026, https://www.bloomberg.com/opinion/articles/2026-05-07/jones-act-waiver-exposes-the-law-s-economic-security-failures While current Jones Act freight rate data are not available, there is other evidence that suspending the law has improved the efficiency of US shipping. Scott Lincicome has reported that, contrary to fears that the services of the small Jones Act fleet would be displaced, foreign shipping has simply added to the carrying capacity available to move goods between US ports. This indicates that the Jones Act has imposed significant constraints on the supply of commercial shipping. The corollary is that for most of the past century, freight rate premiums for Jones Act shipments have been substantial, with concomitant impacts on prices for many products. Removing Jones Act restrictions has also allowed energy companies to adjust to market conditions, as Colin Grabow has reported. On a recent earnings call , a Phillips 66 executive spelled this out: “[W]e moved Bakken crude oil to our Beaumont terminal on the U.S. Gulf Coast and then, leveraging the Jones Act waiver, to our Bayway refinery. We displaced international crudes with domestic grades … and sold the international barrels into tight overseas markets. We placed gasoline from our U.S. Gulf Coast commercial blending facilities into the West Coast using the Jones Act waiver.” Similarly, Chevron CEO Mike Wirth explained that “the waiver … allows us to use ships that otherwise couldn’t trade in these markets to move supplies from where they exist to where they’re desperately needed.” For example, foreign-flagged vessels, operating under the waiver, have transported 1.9 million barrels of energy products from Gulf Coast ports—Corpus Christi, Houston, New Orleans, and Port Arthur—to California, which faces a dire energy situation . Finally, Jones Act supporters frequently tout the law’s putative national security benefits. Ironically, the U.S. Maritime Administration (MARAD) has offered national security rationales for several recent Jones Act waivers. For example, to justify a shipment of 297,000 barrels of vacuum gas oil to southern California on a Marshall Islands–flagged vessel, MARAD pointed to “acute supply chain disruptions arising from the ongoing conflict with Iran” and indicated that these “market dislocations requir[e] immediate logistical flexibility to ensure adequate fuel availability at critical U.S. demand centers.” Similarly, for a shipment of 300,000 barrels of motor fuels and gasoline from New Orleans to Florida on a Singapore-flagged vessel, MARAD argued that “the oil and petroleum products transported by Valero on foreign-flag vessels will provide much needed energy supplies within the United States and aid in averting an energy crisis” associated with the closure of Hormuz. Some Jones Act supporters have argued that Jones Act reform would benefit shipping and military interests in countries such as China and Russia. MARAD reports belie that notion. As of May 11, no Jones Act waiver shipments have involved Chinese or Russian-flagged vessels (Figure 2), nor are adversarial nations represented among the ship owners or operators . Instead, the United States, Singapore, Japan, and Switzerland top that list. Figure 2: Jones Act Waiver Voyages by Vessel Flag (as of May 11, 2026) Source: Authors’ tally based on U.S. Maritime Administration, MARAD 501c Waiver Report, May 11, 2026, 2:00 p.m. The longest Jones Act waiver since 1950 has shed light on the consequences of this antiquated law. The Jones Act was initially adopted to ensure a ready US merchant marine that could support the country during wartime. However, as the Iran war–driven energy shock has shown, the Jones Act actually undermines America’s resilience, especially during conflicts and emergencies . At such junctures, America should be able to harness all its resources, including domestic energy supplies and all available vessels, regardless of their flag, that can efficiently distribute those resources to where they are acutely needed. Therefore, policymakers should eliminate the Jones Act and other regulations that undercut market mechanisms and stifle competition in waterborne shipping. If not now, then when? The post The Jones Act Waiver Two Months In: What It Tells Us About the Costs of Unnecessary Regulation appeared first on American Enterprise Institute - AEI .