President Donald Trump proposed on Monday that the United States will provide protection for shipping through the Strait of Hormuz in exchange for a 20% fee on cargo. The announcement comes amid rising security concerns in the region following the US-Israeli conflict with Iran. Trump stated,
The U.S.A. will be, from this point forward, known as ‘THE GUARDIAN OF THE HORMUZ STRAIT,’ but as such, and as a matter of FAIRNESS, will be reimbursed, at the rate of 20% on all cargo shipped,
according to his post on Truth Social.
Key Details
The proposal has raised questions regarding its legality and feasibility. Experts have expressed skepticism about the practicality of such a fee, which would significantly exceed typical shipping charges. John McCown, a senior fellow at the Center for Maritime Strategy, noted that shippers generally pay around 2%-3% of the value of their goods in fees. A 20% charge could deter shipping companies from using the service, as it may be unaffordable.
Background
Additionally, there are concerns that insurers may refuse to cover vessels transiting the Strait if they perceive the security risks as too high, regardless of the willingness of shipping companies to pay for US protection. The White House has not provided further details on how the fee would be calculated or implemented.
Related coverage: Trump proposes 20% fee for US protection in Hormuz Strait.
The proposal could impact shipping companies and insurers operating in the region, particularly those involved in transporting oil and gas. A high protection fee may lead to increased shipping costs and potential disruptions in oil supply routes. Investors will watch for further clarification from the White House regarding the implementation of this proposal and its implications for maritime security in the Strait of Hormuz.