President Donald Trump backed away from his plan to impose a 20% charge on cargo shipments through the Strait of Hormuz after U.S. allies in the Gulf, including the UAE, Saudi Arabia, Qatar, Bahrain, and Kuwait, urged him to drop the proposal.
Trump announced the reversal on Tuesday, July 14, just one day after rolling out the fee, saying expected revenue would be replaced by forthcoming direct investments in the U.S. from Gulf states. He did not specify a dollar amount or which countries would participate.
The proposed fee would have amounted to roughly $30 million per full supertanker carrying oil through the strait, based on current oil prices of approximately $80 per barrel and supertanker capacity of about two million barrels. By comparison, Iran had been charging up to $2 million per voyage on an ad-hoc basis, according to people familiar with the matter.
At least one Gulf Cooperation Council member state had reached out to the U.S. government to clarify Trump’s comments after the initial announcement. Gulf states remained united in wanting to ensure no tolls or fees are imposed on ships traveling through the strait, according to a person familiar with the matter.
A Gulf energy official expressed concern that the U.S. fee would encourage other nations, including China, to impose similar charges on waterways around the world. Traders, analysts, and industry stakeholders had dismissed the idea as unworkable and unlikely to be fully implemented given the administrative complexity and diplomatic consequences.
John Calabrese, a senior fellow at the Middle East Institute, described the proposal as treating freedom of navigation less as an international principle to be upheld than as a service to be sold. A 20% fee on oil cargoes priced at $78 per barrel would likely translate to an additional 37 cents per gallon of gasoline, according to analysis by ClearView Energy Partners.
While Trump appeared to shelve the idea, the concept may not disappear entirely. He has floated the possibility of U.S.-collected fees since early April, and the late Senator Lindsey Graham voiced support last month, suggesting the administration may still seek reimbursement for U.S. naval activity in the strait.
For the UAE and other Gulf states that depend on the strait for trade, the reversal provides temporary relief from additional cost pressures on already strained supply chains.
Sources: The Business Times, The Business Times shipping analysis
