Trump withdraws Strait of Hormuz transit fee proposal: How Suez, Panama and other key waterways work | Today’s news
Another TACO moment? US President Donald Trump’s plan to remove a 20% tax from cargo passing through the Strait of Hormuz lasted barely 24 hours. According to a report by CNN, Trump has now withdrawn the proposal and replaced the so-called “American reparation fee” with trade and investment agreements that the Gulf states would make with the United States.
On Monday at the Truth Social, Trump called the United States the “guardian of the Strait of Hormuz” and added that 20 percent of all cargo sent would be reimbursed as part of justice.
The latest twist may bring the ‘TACO’ debate back into focus, a market acronym coined to refer to instances where Trump has softened or reversed previously announced positions. TACO stands for ‘Trump Always Chickens Out’.
Quick answers to key questions
•5 QUESTIONS
Trump proposed a 20% fee on all cargo passing through the Strait of Hormuz, which he later withdrew within 24 hours.
Trump withdrew a proposal to replace it with trade and investment agreements between the Gulf states and the United States.
The proposed 20% fee is significantly higher than typical shipping fees, which typically range from 2% to 3% of the cargo value.
Yes, shipping companies have expressed concern that such high fees would make the Strait of Hormuz routes too expensive and discourage their use.
The proposal raised concerns about the legality of levying fees in international waters, as established maritime law usually prohibits such conduct.
However, the battle to obtain economic benefits from the Strait of Hormuz is far from over. Amid the intensifying battle between the US and Iran over a key global energy route, here’s a look at how the world’s other key waterways charge ships for transit – and why.
Map of daily volumes of oil and other liquids transported through the world’s maritime oil choke points (million barrels per day) (1H25). Credits: US Energy Information Administration (EIA) (U.S. Energy Information Administration (EIA) )
Strait of Malacca
It is a critical sea route for Asian energy and trade. The waterway connects the Indian Ocean with the South China Sea and the wider Pacific, providing the shortest sea route between the Middle East and East Asia. Ships reportedly do not pay transit tolls. However, Indonesia, Malaysia and Singapore receive voluntary contributions to a fund that maintains navigational aids such as buoys, lighthouses and lighthouses.
Strait of Bab el-Mandeb
Also known as the Suez Gateway, the waterway is a stretch of water at the entrance to the Red Sea that connects the Indian Ocean to the Suez Canal. There are currently no tolls to pass through the Bab el-Mandeb Strait. In April, the Houthis were said to be considering plans to impose tolls on ships traveling through the waterway after Iran set a precedent in the Strait of Hormuz.
Read also | India condemns attack on UAE-linked vessels that killed an Indian in Hormuz
Suez Canal
The 193 km man-made canal through Egypt connecting the Mediterranean and the Red Sea is the shortest sea route between Europe and Asia. It is said to carry about 15% of the world’s maritime trade. The sea route is operated by Egypt’s State Suez Canal Authority, which oversees shipping and sets transit rules. According to Bloomberg, one-way passage for a loaded tanker of the most common type can cost around $380,000.
Panama Canal
Like the Suez Canal, the Panama Canal is an 80 km man-made waterway connecting the Atlantic and Pacific oceans. It is billed as the fastest sea route between Asia and the US East Coast and carries about 6% of global seaborne trade. The canal is a sovereign infrastructure owned and operated by Panama. Tolls depend on vessel type, capacity and cargo. Bloomberg notes that a mid-sized oil tanker typically pays $350,000 to $400,000 to reserve passage through the canal, but auctioned slots can cost around $1 million during droughts or geopolitical disruptions.
Read also | Iran-US conflict: Tehran vows not to reopen Hormuz | The best update
Turkish Straits
Turkey is crossed by the Bosphorus and Dardanelles straits, which connect the Black Sea to the Mediterranean. It is an important shipping corridor for oil, gas, grain and container cargo from Russia, Ukraine and other Black Sea states. It follows the Montreux Convention and charges a service fee, not a transit toll, for ships passing through the Turkish Straits. According to Bloomberg, a typical Suezmax oil tanker would pay around $240,000 in tolls for a round trip through the two straits starting July 1.
Danish Straits
The Danish Straits are a series of channels that connect the Baltic Sea with the North Sea. The Oresund Strait, a key channel, separates Denmark and Sweden and is the gateway from the Baltic Sea to the Atlantic Ocean. It serves major ports in Sweden, Finland, the Baltic states, Poland and Germany. There are no fees for crossing the strait. However, the International Maritime Organization recommends pilotage services.
Cape of Good Hope
The Cape of Good Hope, located at the southern tip of Africa, is not a maritime hub, but serves as a key alternative shipping route between Asia and Europe. The open sea passage around South Africa also forms an important link for the trade routes connecting the Americas with Asia. As it is a natural, open international waterway, there is no transit fee.
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With input from Bloomberg and the US Energy Information Administration
