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Hormuz Tax Impact: 20 percent tax on all goods passing through the Strait of Hormuz: Trump

  
  
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  A major threat has arisen for India's supply chain after US President Donald Trump announced to impose a 20 percent tax on all commercial goods (cargo) passing through the Strait of Hormuz. Trump posted on his social media platform Truth Special that from now on, America will be considered the protector of the Strait of Hormuz and in return for providing security to this highly sensitive area, a fee of 20 percent will be charged on all goods, the process of which is starting immediately. He clarified that the waterway will remain open but the US is re-blocking it to stop the movement of Iranian ships, while other countries will be able to use this route. This decision will increase freight rates in India, crude oil prices will go up and the supply of fertilizers and LNG will be badly affected. This decision will have a direct impact on India's energy and agriculture sectors. India imports more than 50 percent of its LNG (liquefied natural gas) and 35 to 50 percent of its crude oil through the Strait of Hormuz. With a 20 percent tax and increased maritime war-risk insurance, this fuel will become very expensive once it reaches India. In addition, India imports a large amount of fertilizers and their raw materials from the Gulf countries, due to which this blockage in the Persian Gulf will increase agricultural costs significantly. If ships are sent through alternative routes such as the 'Cape of Good Hope' (around the tip of Africa) to avoid US taxes and security risks, it will increase the sea travel time by 10 to 15 days and will increase the cost of basic freight by up to 30 percent. Inflationary pressures in India will increase further due to higher transportation and raw material costs. The country's overall wholesale and retail inflation, which was recently recorded at 4.38 percent, is likely to rise further due to this new crisis.
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