>Presumably most ships owners would look and discover that the US navy is the largest in the world and thus switch their flags to the US - they would then pay taxes to the US (and have to deal with a lot of other US laws that they don't now). Either that or they would pay a lot more insurance.

You've just described mercantillism. Post Bretton-Woods is the first time in centuries the world hasn't worked that way. The dream of free trade and globalism was that everyone had equal protection on the seas. I fear you're correct that we're returning to a darker time where autarky reigns and trade is restricted to essentials.