“Where will it end?” Trump’s 20% Hormuz Tariff Plan Called Shipping Industry ‘Fundamentally Bad’ | Today’s news

Tensions between the US and Iran have escalated sharply after US President Donald Trump announced that Washington would restore a blockade on Iranian ships passing through the Strait of Hormuz while proposing a 20% levy on all other cargo ships using the vital shipping route. Trump has said America will become the “guardian of the waterway,” reviving a dispute with Tehran over the status of a key shipping lane.

The president posted on social media that the strait will “remain OPEN, with or without Iran.” While Iranian ships would be blocked from entering or leaving, vessels from other countries would be allowed to pass. But the U.S. “will be reimbursed in JUSTICE at the rate of 20% on all cargo shipped,” the president wrote.

Trump said the “process and shaping” of his plan “will begin immediately.” The White House did not provide further details about Trump’s proposal, including how it will be administered or whether it has been communicated to America’s Gulf allies.

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Trump’s proposal includes a 20% levy on all cargo vessels passing through the Strait of Hormuz, aimed at rewarding the US for providing security in the area while blocking Iranian ships.

The shipping industry has called Trump’s fee proposal “fundamentally wrong,” saying it undermines the principle of free passage in international waters and could significantly increase shipping costs.

Imposing a 20% fee could discourage ships from using the Strait of Hormuz, as current shipping costs average around 2% to 3% of cargo value; increased fees may make the route too expensive for businesses.

Shipping companies may weigh the optional nature of paying the 20% fee against the perceived security benefits provided by the US in a contested maritime environment.

While Trump’s fee proposal could be legal if deemed optional, it could face legal challenges because the United Nations’ International Maritime Organization opposes mandatory tolls on vessels using international straits.

The proposal drew sharp criticism from shipping companies and maritime experts.

More than 10 people involved in the shipping markets, including a handful whose ships have passed through Hormuz in recent weeks, told Bloomberg they were blindsided by the announcement of a potential fee for cargo crossing the waterway. They said it’s too soon to know what the plan might look like in practice and how it would affect their transit decisions.

“Fundamentally wrong…”

Germany’s Hapag-Lloyd, the world’s fifth-largest container shipping company, told Reuters on Tuesday: “It would be fundamentally wrong to charge for passage through international waters.”

The German Shipowners Association (VDR) said such a measure would be legally impermissible and would violate the principle of free passage in international waters.

“Today it is the Strait of Hormuz, tomorrow the Strait of Malacca, and the day after tomorrow another international strait. Where will it end?” GDR chief Martin Kroeger told business magazine Wirtschaftswoche in an interview on Tuesday.

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Civilian merchant shipping must not become a pawn in geopolitical conflicts, he added.

“Increased costs will deter ships from using the strait”

Any tariffs imposed by the United States could further discourage ships from using the Strait of Hormuz, where traffic has already slowed significantly in recent days, according to the Baltic and International Maritime Council, the world’s largest shipping association.

“While the proposal to fund security through a fee on cargo passing through the Strait of Hormuz is innovative and well-intentioned, the increased cost will present an additional barrier to passage through the Strait of Hormuz that can only be offset by a significant reduction in the threat posed by Iran,” Jakob P. Larsen, BIMCO’s chief safety and security officer, told CNBC on Tuesday.

“The fee makes the route too expensive”

Noting that it’s still unclear how the fee would be calculated, John McCown, a senior fellow at the Center for Maritime Strategy, told CNN: “Is it 20% of our blockade costs, divided by the number of ships, somehow?”

“Other options include 20% of the cost the US Navy incurs to escort the cargo, or a 20% fee on the value of the goods being transported.”

Read also | US oil tops $75 after Trump renews Strait of Hormuz blockade on Iranian ships

Shipping fees are normally around 2%-3% of the value of the cargo. An increase to 20% would dramatically increase costs, making the route too expensive for many businesses, McCown pointed out.

Iran views any challenge to its authority in the Strait as a violation of the interim peace agreement it concluded with the US. The deal provided for free commercial traffic during a 60-day negotiating window and required Tehran to “take measures” to ensure safe passage of vessels. The country continues to insist that ships must obtain permits and follow approved routes.