Explained: Why Trump dropped his 20% Hormuz fee proposal and contradicted his own aides | Today’s news
On July 14, US President Donald Trump backed away from his proposal to impose a 20 percent fee on cargo passing through the Strait of Hormuz.
Instead, President Trump said the United States would pursue trade and investment deals with Gulf countries to offset the cost of securing the strategic waterway.
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“Based on highly productive conversations with leadership in the Middle East, I have decided to replace the 20% fee to cover the United States with trade and investment agreements that the various Gulf states will bring to the United States…” he wrote on Truth Social.
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Trump replaced the 20% fee proposal with trade and investment agreements with Gulf states, saying the agreements would offset the cost of securing the strategic waterway.
The fee has been criticized for its potential legal issues, uncertainty in implementation and the burden it would pose on transportation costs, which could lead to higher oil prices.
International maritime law generally prohibits a country from imposing fees on vessels using international waterways, making Trump’s plan legally questionable, his aides have pointed out.
Shipping companies and experts criticized the fee as “fundamentally wrong”, saying it would discourage vessels from using the strait and complicate maritime trade.
The imposition of fees raises significant legal and diplomatic concerns, as established international norms dictate that passages on international waterways should be free to ensure free navigation.
The twist came just a day after he floated the idea.
What was Trump’s original plan?
Trump has proposed charging a 20 percent fee on cargo passing through the Strait of Hormuz, arguing that the U.S. bears the cost of keeping open one of the world’s busiest maritime hubs.
Trump’s threat of a fee drew criticism from experts and analysts, particularly given that it was unclear how the proposed fee would be implemented or calculated. Roughly one-fifth of the world’s oil trade moves through the Strait of Hormuz.
Any additional transit costs could increase transportation costs, raise oil prices and affect major energy importers, including India.
India is a big energy importer and about 40 percent of its crude oil imports, 60 percent of LNG imports and a whopping 90 percent of liquefied petroleum gas (LPG) imports came from West Asia through the Strait of Hormuz, according to a report by the Indian Express.
What was Trump’s reasoning for the reversal?
President Trump said he had “very productive conversations” with leaders in the Middle East and concluded that long-term trade and investment agreements would be more beneficial than charging ships a transit fee.
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He argued that the Gulf countries were willing to invest heavily in the U.S. economy, so a toll was not necessary. Still, it’s unclear why Trump backtracked so quickly on his statement.
What about legal obstacles?
The Strait of Hormuz is an international waterway and maritime law generally does not allow a single country to impose transit fees on ships using such sea lanes.
The International Maritime Organization (IMO), the UN’s maritime agency, has already opposed the proposal, saying no country should charge tolls for passage through an international strait.
“We have always been consistent in our position on tolls – the IMO is firmly opposed to the charging of tolls for the passage of straits used for international shipping. There is no legal basis on which to introduce mandatory tolls only for passage through the strait,” an IMO spokesperson said in media reports.
The plan was also criticized by major shipping companies. German container shipping giant Hapag-Lloyd called the proposed fee “fundamentally wrong”, saying commercial shipping should not bear the cost of geopolitical conflicts, Reuters reported.
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Reports also suggested that Gulf governments were caught off guard by Trump’s original announcement.
Many Gulf countries are close security partners of the US and depend heavily on uninterrupted shipping through the Strait of Hormuz. According to US media reports, the indictment of all the vessels could strain relations just as Washington sought greater regional cooperation against Iran.
How did Trump’s aides counter?
In fact, Trump’s proposal contradicted the public assertions of his closest aides, such as Secretary of State Marco Rubio, the US national security adviser.
“No country is allowed to collect tolls or fees on an international waterway. That’s existing international law. That’s the way it is on international waterways around the world and we expect it to be the same here,” Rubio said in June while visiting the Middle East before attending a meeting of the Gulf Cooperation Council, a group of oil-exporting Gulf Arab states. Rubio’s remarks came before the United States signed a joint statement saying the nations “rejected any tolls, fees or attempts to assert control over the strait.”
Vice President JD Vance also shared similar comments on June 18 when discussing a cease-fire agreement between the United States and Iran aimed at reopening the waterway. “We believe that international waterways should be toll-free,” he told a news conference.
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But on June 20, Trump said the United States could collect tolls. His statement came six days after he signed a deal with Iran that formally launched a ceasefire to allow talks on a broader peace settlement. The deal recognized Iran’s power in the strait and said no country would collect tolls for 60 days, although it left open the possibility of tolls beyond that period.
In that statement, Trump said that even after this period, there would be no fees for services provided to Middle Eastern countries as a guardian angel for past, present and future reimbursement purposes “unless imposed by and for the United States of America, unless the agreement is finalized.”
The battle for control of Hormuz
The US is trying hard to effectively control the Strait of Hormuz. According to an agreement signed between the two warring nations on June 17, the strait was to be opened.
Vessel movements through the strait have increased significantly since then, but are still less than they were before the war began. With the recent escalation of hostilities, vessel movements through the critical trade artery have again been affected.
“POTUS is absolutely right. Whoever ensures the safe and secure passage of commercial vessels through the Strait of Hormuz should be compensated for that service. Iran has always been the GUARDIAN of the Strait and will remain so FOREVER. 20% is of course too much. We will be fair,” Iranian Foreign Minister Seyed Abbas Araghchi said on X.
In the past few days, Iranian forces have targeted vessels that were sailing outside shipping lanes authorized by Tehran. The US responded by striking Iranian military targets. Tehran is also targeting US assets in other West Asian countries. Last weekend, Iran announced it was closing the strait to commercial vessels. This comes after President Trump announced on Monday that the US was renewing its naval blockade in the region.
Trump has dropped the proposed tariff for now, but has not softened the broader US strategy. The US president reiterated that the US would continue the blockade targeting Iranian-linked shipping while allowing most commercial traffic through the strait. His reversal appears to change how Washington plans to recoup the cost of securing the waterway, but does not diminish its broader pressure campaign against Iran.
So Trump’s U-turn appears to have been driven by a combination of diplomatic dealings with Gulf allies, legal concerns about tolling ships on an international waterway, opposition from the global shipping industry and a preference for securing economic gains through investment deals rather than the controversial maritime toll.
