President Donald Trump backed away from his decision on a proposed 20% shipping tariff for ships passing through the Strait of Hormuz on Tuesday, less than a day after announcing it, saying Gulf countries had offered big investment deals instead.
Trump made the announcement on Truth Social, saying he would replace transit fees with trade and investment agreements with Gulf states.
“Based on very productive conversations with Middle Eastern leaders, I have decided to replace the 20% US payment fee with trade and investment deals that various Gulf countries will conclude with the United States.” booksHe added that the investments would be “huge” and beneficial to both sides.
Later, Trump told reporters that several foreign leaders had contacted him and asked him to take a different approach. He said that kings and princes want to invest billions of dollars in the United States instead.
However, he did not name any country, announce any signed deals, or provide a timeline. He only said that the investments would be “huge” and beneficial to both sides.
As of Tuesday, Gulf governments had not responded publicly.
Industry and legal experts are pushing back
Strong protest from the maritime industry, international organizations and legal experts who claimed the proposal was illegal led to the decision being overturned.
The tax could have increased the cost of a single shipment by tens of millions of dollars if it had been implemented. A fully loaded natural gas tanker would have paid about $17 million, according to Lloyd’s List estimates.
Analysts also estimated that the fee would have added about $16 to the amount The price of each barrel of oil at $80 per barrel, while a very large oil tanker carrying two million barrels would have faced charges of $24 million per voyage if the oil had been priced at $60 per barrel.
Petras Katinas, research fellow in climate, energy and defense at the Royal United Services Institute in Europe, warned that tariffs could set a dangerous precedent.
If one country starts imposing such duties, other countries might follow suit and impose similar fees on their own trade routes, he said. “Therefore, we are completely undermining international maritime law, which is already in a fragile state.”
Regardless of whether the fee was $200 or $20 million, Richard Mead, editor of Lloyd’s List, was similarly frank, saying that there was “no legal basis for imposing fees on ships for exercising their right to pass through an international strait.” He added that whether these demands originated in Washington or Tehran is “largely beside the point.”
The UN’s International Maritime Organization added its voice, saying that it “strongly opposes the imposition of fees for passage through straits used for international navigation” and that “there is no legal basis on which mandatory fees can be imposed merely for passage through a strait.”
Opposition from within the administration
Even members of the Trump administration themselves were previously opposed to this concept.
Secretary of State Marco Rubio said last month that imposing fees on international waterways was already illegal under current law.
Until June 25thAt a Gulf Cooperation Council meeting in Bahrain, Rubio warned that Iranian losses in the Strait would lead to “total chaos” and spread “like a contagion.”
The tariffs were scheduled to take effect at 2000 GMT. Less than five hours before that deadline, Trump made clear that the strait remained open to all trade, except for ships. Linked to IranWhich will remain under siege.
“I actually like that because I don’t think anyone should be able to put tariffs on the strait,” Trump said, though he insisted that the United States deserves some benefits for keeping the waterway safe.
It remains unclear whether the promised Gulf investments will take any tangible form, or will merely be a cover for a rapid retreat from a plan that is widely viewed as unworkable.
Overall, the promised Gulf investments currently appear to be a weak and uncertain alternative to the abolished shipping tax, given the lack of details and strong legal and industry opposition that has led to a rapid decline.
