As of today, it tolls only for the IRGC. However, that’s not how it sounded yesterday, when Donald Trump seemingly adopted Iran’s toll strategy for the Strait of Hormuz. In announcing the end of the Memorandum of Understanding (MOU) and a reimposition of the naval blockade, Trump added the curious tax after months of defending free shipping through international waters:
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, for any and all costs necessary to do the job of providing safety and security to this very volatile section of the World. The process and formation will begin immediately.
This raised a number of eyebrows, mine included, since the rupture point of the MOU – or at least one of them – has been the IRGC’s insistence on imposing fees on Hormuz traffic. The regime has tried to rope Oman into this strategy, which promoted sharp diplomatic pushback from the US and Gulf states. This claim would at least strip the moral claim of the US in this conflict about defense of free transit, and arguably would set precedents for China and Russia to impose similar “guardian” claims over international shipping near their own waters, or maybe further out than that.
This afternoon, Trump reversed course on the “guardian” tax. Instead, after talks with Gulf states – and likely a few other allies who worried about the precedent – Trump announced a plan for investment partnerships with the affected states in the region that makes a lot more sense:
Oil is flowing like never before, thanks to the awesome Power of the United States Military. A special salute to Secretary of War, Pete Hegseth, Chairman of the Joint Chiefs of Staff, Dan Caine, and Commander of the United States Central Command, Admiral Brad Cooper. Because of them, and all members of the Most Powerful Military anywhere in the World, BY FAR, the Strait of Hormuz is open to ALL Ship traffic except for Iran — and that is because of their lying, violent, malicious leadership, which is taking them down the path of TOTAL DESTRUCTION. We will therefore have a FULL Blockade, but only on Ships coming to and from Iranian ports, or carrying anything have to do with Iranian cargo.
Based on highly productive conversations with Middle East leadership, I have decided to replace the 20% United States Reimbursement Fee with Trade and Investment Deals that the various Gulf States will be making into the United States. Those Investments will be MASSIVE but, at the same time, extraordinarily good for them, and their future. As everyone is aware, we have the largest Dollar Investment into the United States, of any Country in History, but these new Investments will make that Number even larger, and we will see Factories, Plants, and Equipment pour into the United States at Historic levels, which will create additional millions of High Paying AMERICAN Jobs!
America is WINNING again, winning like never before. The days of Iran killing hundreds of thousands of people, including 52,000 protestors, are OVER and, most importantly, IRAN WILL NEVER HAVE A NUCLEAR WEAPON! Thank you for your attention to this matter. President DONALD J. TRUMP
Even apart from the issues of bad precedents on international shipping, this deal makes a lot more sense than tolls or taxes. The latter may produce an income stream for a while, but it will also accelerate the disincentives for using the Strait of Hormuz. That may have been part of the intent, as it would undercut Iran’s leverage when the blockade ends, but the revenue stream will not do much for the US economy otherwise. Large-scale investments will do a lot more to benefit Americans more directly than funds trickling into the general fund.
Of course, as skeptics will argue, the downstream investments may never materialize. That may be true, although Trump and his team will likely insist on a significant nominal start to meet these pledges. On the other hand, there was absolutely zero chance that we would have ever collected tolls from Hormuz shipping, not from our allies and especially not from our enemies. I suspect that the "conversations" that took place in the roughly 24 hours between these announcements made that very clear to Trump.
Why float it in the first place? Trump has shifted back to war in the Gulf region, and will now have to explain it to the American electorate. His address on Thursday night from the White House will be the start of a campaign to convince voters of its necessity. Making it a net-revenue effort, or at least a military action whose cost is significantly covered by its results, would help with the sales pitch. Will it work? It can't hurt, but much will depend on how quickly and visibly those investments manifest themselves in the US economy. It also depends on Trump sticking with this course of action until a conclusion that puts an end to the IRGC's ability to terrorize the region and threaten our interests.
Editor's Note: For decades, former presidents have been all talk and no action. Now, Donald Trump is eliminating the threat from Iran once and for all.
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