About the author: Christopher Tang is a distinguished research professor at the UCLA Anderson School of Management.
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Asked about Iran’s closure of the Strait of Hormuz in March, President Donald Trump remarked that the waterway wasn’t a vital concern for the U.S. “It doesn’t really affect us,” he said. “We have so much oil.”
The logic was simple and the math seductive: The U.S. imports less than 10% of its crude oil through that narrow waterway, accounting for a mere 2% of its total annual consumption. If the U.S. doesn’t rely on foreign oil, why should it be concerned about international waters?
That rationale relies on a first-order analysis that ignores the structural realities of modern, interconnected supply chains. Waterways like the Strait of Hormuz are increasingly important to consumers the world over. Their openness is also being increasingly threatened by geopolitical actors.
History serves as a stern reminder that key straits have always been used for leverage. In the 15th century, the Danish monarchy started collecting “sound dues” on ships crossing the Baltic Sea passing through Øresund, a narrow strait between the port towns of Helsingor and Helsingborg. At the coastal town of Elsinore, the kingdom forced ships to stop under the watchful eye of cannons and pay a tax based on cargo value. These tolls provided up to two-thirds of the kingdom’s annual income; it took an international trade conference to finally abolish them in 1857.
Today, such tolls are no longer straightforward fares imposed on foreign ships by the powers that be—although sometimes they are, as we see now in Iran. Instead, shipping taxes show up as increased insurance costs and longer routes, which compound costs across globalized supply chains.
The U.S. is learning this the hard way. As the Iran war persists and economic pressure mounts, the reality of global dependence on key waterways—and the supply chains that rely on their safety and openness—is setting in. White House officials are now urging China to pressure Iran to reopen the waterway and calling on the United Nations to find a diplomatic resolution.
This shift reflects a burgeoning realization that while the U.S. might not fuel its cars with gas from the Middle East, its supply-chain partners in Asia and Europe certainly do. When key waterways for transporting that energy seize up and our partners face an energy crisis, their ability to produce and ship goods to American shores is compromised. Prices go up for all.
One takeaway is that America’s 21st century security strategy of friend-shoring—shifting manufacturing from China to allies like Vietnam and the Philippines—doesn’t automatically equal risk-proofing. In fact, friend-shoring often transfers vulnerability from geopolitical trade wars to physical chokepoints on global seas.
Nowhere is this more visible than the Taiwan Strait. Sandwiched between China and Taiwan, the Taiwan Strait has become a critical thruway for technology headed to the U.S. Nearly 40% of the world’s semiconductors pass through the strait, making it a critical chokepoint for the tech industry. The security of the strait is especially critical to the U.S. automotive and tech sectors, which depend on Taiwanese and Korean chips.
Yet the strait is facing growing threats from China. Last week, Chinese President Xi Jinping warned there could be “clashes and even conflict” over the strait if Taiwan pursued independence. Bloomberg Economics estimates that a conflict over the strait could erase $10.6 trillion from the global economy, or 10% of global gross domestic product.
Also at risk is the Strait of Malacca, which connects the South China Sea with India and carries roughly 25% of global trade. It recorded a 19-year high in piracy incidents in 2025. As ships are rerouting due to the closure of the Strait of Hormuz, the capacity of the Strait of Malacca is being stressed. Its narrowest point is less than two miles wide, yet it must now accommodate roughly 440 ships a day—60% more than before the war.
At the same time, the Bab el-Mandeb Strait, a 20-mile-wide passageway that ships from the Persian Gulf must cross to enter the Suez Canal, is under stress as Yemeni Houthis continue to target Israel with drones and missiles. Ship insurers have classified the strait as a high-risk area and hiked premiums. The increased price of insurance acts as a tax on global trade, further eroding the margins of firms that have already invested heavily in diversifying their supply bases, and triggering a massive rerouting of commercial vessels around Africa’s Cape of Good Hope. The detour adds 10 to 14 days to transit times, significantly increasing shippers’ operational costs.
Modern risk management requires logistics strategies that account for these sorts of threats and that recognize the secure transit of our trade and supply-chain partners’ inputs and finished goods matter. The U.S. must look at the total ecosystem of its allies, including the safe transport of the energy that keeps their production lines running. We need a coordinated maritime security framework that goes beyond reactionary naval escorts to include long-term diplomatic and economic safeguards. Waterways must be treated as essential public goods.
In an interconnected world, global supply-chain operations rely on the frictionless movement of vessels. To sustain the global economy, we must ensure that the “sound dues” of the 21st century—instability, piracy, and conflict—aren’t the price of doing business.
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