In April, I wrote a piece titled “The Strait of Hormuz Reverse Uno Card” which also went viral on X. In that piece, I credited President Trump with a smart move blockading the Strait in order to prevent Iran from charging vessels $2MM to traverse it safely. I wrote:
This looked like worst-case scenario for the US. Iran succeeded in closing the Strait and causing economic problems all over the world, then found a way to profit from their own actions. Then, President Trump played his “reverse uno” card. He correctly realized that it wasn’t just the rest of the world that depended on free passage through the Strait of Hormuz, and that it was Iran that had the most exposure. Iran is a big oil producer, and oil exports account for 80% of Iran’s exports, 60% of government revenue, and 25% of its GDP. It turns out that Iran has more economic exposure to this narrow waterway than anyone else. President Trump sent the US Navy to form a blockade. He closed the Strait himself ensuring no more $2MM/vessel charges and an inability for Iran to export oil.
When peace talks with Iran looked like they were heading in a positive direction, Iran briefly stopped attacking ships and the US lifted the blockade. When talks failed, something DKI predicted here and here, Iran declared they’d close the Strait again, and they have attacked and hit ships traversing the waterway. President Trump is now talking about charging vessels a 20% fee to provide protection. From his point of view, the move makes sense. It’s Iran attacking vessels, not the US. Providing US Navy escorts and using military hardware to protect other country’s ships from those attacks is both expensive and also not the responsibility of the United States. The President is saying that if the US has to shoulder the cost and responsibility of protecting foreign ships, then those ships should reimburse the US for some of those costs.
While this makes sense intuitively, I think it’s a mistake. I’m not an attorney, but my understanding is that each country can claim control of the waters in nearby proximity to its shoreline, but that there are international laws designating open water as free for all to use. Iran charging tolls for safe passage and attacking the ships of uninvolved countries is wrong and illegal. If President Trump’s response to that is to offer the protective services of the US Navy at a fee as an optional insurance policy, that would be a reasonable response. Based on what I’ve read, the President is talking about the US placing an involuntary toll on all Strait traffic. This is the exact move which he previously countered when Iran did it. The US shouldn’t engage in the exact same behavior it previously prevented.
I see downside in at least two places. First, the US can accurately attribute any inability to traverse the Strait of Hormuz as well as the additional costs involved in finding alternative transportation as costs imposed by Iran. Other countries may have complained, but at some level, most seemed to understand that the choice to attack or threaten the ships of uninvolved countries was a decision made by the Iranian Mullahs. Imposing an across-the-board involuntary tax for protection would put the US on level footing with Iran in this matter.
Second, there are already articles being written on what would happen if China used its submarines and aquatic drones to place tolls on global shipping. Right or wrong, I’ve written about how China will use US actions in Iran as an excuse for taking over Taiwan at a time of its choosing. China also has a view that weaker countries should pay tribute to stronger ones. By the time it’s in the newspaper, it’s almost certain that the CCP has discussed it. If the US puts tolls on the Strait of Hormuz, we have to assume China is thinking about what they can get to provide “protection” for the world’s oceans.
I think this is unlikely to happen. White House officials from anonymous sources to Vice President Vance and Secretary of State Rubio have publicly said that international waterways should be free of tolls. Further, President Trump has a habit of making big asks and big threats to make his later more-reasonable positions seem relatively more attractive. I don’t think President Trump will actually do this, but I do think talking about it in public establishes a precedent that China and other countries will notice.
I also think time will make the situation less sensitive. When the war started, the fear was that close to 20% of the world’s oil would no longer be able to get to market. While there has been a deficit, the shortage has been less severe than predicted because the capacity to route oil away from the Strait was greater than expected. Because they understand that Iran will continue to assert control over this international waterway, Gulf countries are actively looking at new pipelines, ports, and infrastructure to further reduce future dependence.
Your tl;dr version: Tolling the Strait of Hormuz is a bad idea. I don’t think it will happen, but even threatening to do it has downside.
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