They said tolls were wrong

Until last month, the United States said paying tolls to traverse international waterways was wrong. In fact, it destroyed merchant ships and killed crew members to prevent tolls from becoming the norm. Now, just a few weeks after killing people over paying tolls, the United States is imposing its own toll. An unreasonably large one. President Trump has – once again – swung from one coercive extreme to another.

What changed

On July 13, Trump wrote: "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 is an absurdly high tax that will harm ordinary Americans, and represents a full reversal from his administration's previous stance.

The timeline

The Trump Administration has repeatedly claimed Iran is behaving in ways that are unlawful, wrong, and damaging – then adopted the same behavior.

On blockades:

• February 28: United States and Israel attack Iran. In response, Iran imposes a blockade on the Strait of Hormuz.
• Repeatedly: Trump administration declares the Iran blockade illegal and wrong, saying Iran "does not control the Strait".
• April 13: Trump administration imposes its own blockade.
• July 13: Trump administration re-imposes its blockade.

On tolls:

• March 13: Iran imposes a toll on vessels transiting the Strait of Hormuz.
• Repeatedly: Trump administration declares tolls to be unlawful and wrong:
  • March 27: "Not only is this illegal, it’s unacceptable, it’s dangerous for the world. And it’s important that the world have a plan to confront it."
  • June 23: "It's an international waterway. No country is allowed to charge tolls or fees on an international waterway. That's existing international law. That's the way it is."
• July 13: Trump administration imposes its own toll.

Analysis

Setting aside the legal and moral hypocrisies, which are obvious, let's focus on the financial.

A 20% toll is a massive additional tax. All government interventions in markets cause price increases and/or shortages. This toll is no different.

Consider an oil tanker carrying 500,000 barrels of crude valued at $75/barrel (current market rate). That cargo is worth $37.5 million. The 20% toll is $7.5 million. That's a huge sum in its own right, which must somehow be paid before the oil is sold. More importantly, this toll dwarfs the typical cost of shipping oil. Shipping oil from the Gulf to Asia usually costs around 2-3% of the oil's value. This tax will increase that cost to 22-23% of the oil's value. By imposing it, the United States is putting direct upward pressure on oil prices globally, including for Americans.

Basically, the American government will collect extra revenue and become more powerful, while the American people will pay higher prices and become less powerful. It is under Trump as it was under Biden. But the President's party is irrelevant – why would the American people tolerate this tradeoff under any administration?

Conclusion

The Trump administration killed people to prevent the blockade of waterways and the taxation of cargo. Now it is itself blockading waterways and taxing cargo, and in a manner that obviously harms itself as the world's largest oil consumer. The Trump administration is eroding the power and dignity of the United States, and reducing ordinary Americans.

It is obvious the United States Congress must reduce the power of the Executive branch, enforcing clear limits that apply regardless of party. If Congress won't, the American people will be forced to do it themselves.