Trump withdraws Strait of Hormuz transit fee proposal: How Suez, Panama and other key waterways work
Another TACO moment? US President Donald Trump's plan to extract a 20% fee from cargo passing through the Strait of Hormuz lasted barely 24 hours
Another TACO moment? US President Donald Trump's plan to extract a 20% fee from cargo passing through the Strait of Hormuz lasted barely 24 hours. According to a CNN report, Trump has now withdrawn the proposal, replacing the so-called “US reimbursement fee” with trade and investment deals that Gulf states would make with the United States. On Monday, taking to Truth Social, Trump dubbed the United States 'the guardian of Hormuz Strait' and further added that as a matter of fairness, it will be reimbursed at the rate of 20 per cent on all cargo shipped. The latest reversal may bring the 'TACO' debate back into focus, a market shorthand 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 1 What was Trump's proposed fee for cargo transiting the Strait of Hormuz? ⌵ Trump proposed a 20% fee on all cargo transiting the Strait of Hormuz, which he later withdrew within 24 hours. 2 Why did Trump withdraw the 20% toll proposal for the Strait of Hormuz? ⌵ Trump withdrew the proposal to replace it with trade and investment deals between Gulf states and the United States. 3 How does the fee proposed by Trump compare to typical shipping fees? ⌵ The proposed 20% fee is significantly higher than typical shipping fees, which usually range from 2% to 3% of the cargo's value.
4 Should shipping companies be concerned about fees for transiting the Strait of Hormuz? ⌵ Yes, shipping companies expressed concerns that such high fees would make routes through the Strait of Hormuz too expensive and discourage their use. 5 What implications does Trump's proposal have on international maritime law? ⌵ The proposal raised concerns regarding the legality of charging fees within international waters, as established maritime law typically prohibits such actions. However, the battle to extract economic gains from the Strait of Hormuz is far from over. Amid an intensifying tussle between the US and Iran over the key global energy route, here's a look at how the world's other key waterways charge ships for transit — and why. View full Image View full Image Map of daily transit volumes of petroleum and other liquids through world maritime oil chokepoints (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 links the Indian Ocean with the South China Sea and the wider Pacific, and provides the shortest sea route between the Middle East and East Asia. Reportedly, ships do not pay a transit toll. However, Indonesia, Malaysia, and Singapore receive voluntary contributions to a fund that maintains navigational aids such as buoys, beacons, and lighthouses. Bab el-Mandeb Strait Also known as the gateway to Suez, the waterway is a stretch of water at the entrance to the Red Sea, linking the Indian Ocean with the Suez Canal.
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