Commercial shipping traffic through the Strait of Hormuz has collapsed in the wake of the Trump administration’s “precise, overwhelming military campaign” against Iran. Shipping costs are rising to reflect the heightened risk, and maritime insurers are canceling policies to renegotiate higher rates.
On Tuesday, Trump announced on social media, “Effective IMMEDIATELY, I have ordered the United States Development Finance Corporation (DFC) to provide, at a very reasonable price, political risk insurance and guarantees for the Financial Security of ALL Maritime Trade, especially Energy, traveling through the Gulf.” He added that the US Navy will begin escorting tankers “if necessary” and that the US “will ensure the FREE FLOW of ENERGY to the WORLD.”
Trump’s decree has been met with a combination of uncertainty and skepticism by shipowners and analysts. The DFC’s political risk insurance is a development finance tool for investments and projects in lower-income countries, not a universal war-risk insurer for all shipping lines. Does the president have statutory authority to “order” the DFC to provide for all shippers at “a very reasonable price”? While the DFC may be able to intervene at the margins, the overall answer is no.
The gap between the president’s claim and reality typifies the governing style I wrote about in a recent Vox essay, “Trump’s Dream Is a Giant Slush Fund Congress Can’t Touch.” It’s a familiar pattern in which Trump makes a grandiose claim, then his administration scrambles to improvise something that can pass legal muster.
Following Trump’s post, Reuters reported that Treasury Secretary Scott Bessent and Energy Secretary Chris Wright were expected to meet with Trump “to present a list of proposals to address the issue and finalize a response.” Bloomberg quoted an RBC Capital Markets analysis that “we question how much planning has been done on the insurance backstop thus far and think there could be a number of challenges in executing this plan quickly.”
The dots appear to connect.
As I discuss in my essay:
- Trump wanted a sovereign wealth fund. But when the White House realized a formal federal investment fund couldn’t be unilaterally controlled by Trump, the administration pivoted to ad hoc equity acquisitions in private companies.
- Trump declared Venezuela’s oil money would be “controlled by me.” After that raised obvious power-of-the-purse issues, the White House pivoted to a complicated scheme involving an executive order, Treasury accounts, a Qatar-based account, and sanctions licensing.
- Trump touted tariff-relief “deals” with allies as if they created a massive pot of foreign cash that he himself could use to select investment projects in the US. In reality, the “deals,” which would be better described as shakedowns, amounted to nonbinding pledges, and no country is cutting Trump a giant check.
- Trump’s pay-to-play chip export scheme treated national security policy as a revenue grab by offering Nvidia and AMD permission to sell certain chips to China in exchange for a 25 percent cut, even though the Constitution bars taxes on exports. The administration then improvised by imposing an import tariff on the chips, which are manufactured abroad, shipped to the US, taxed, and then shipped to China.
- Trump heralded his Board of Peace as a grand international initiative. But an alleged draft charter raised alarm by tying a country’s continued membership to a $1 billion payment and concentrating sweeping power in the board’s chair, which would be Trump. While the White House insisted it wasn’t really a fee, basic legal and accountability questions about the board’s money multiplied. Trump then announced that the US would contribute $10 billion to the board, raising even more questions.
Trump’s declarations routinely begin as sweeping assertions of personal control that immediately cause one to ask, “Can he do that?” That fundamental question then spawns a stream of additional questions as his subordinates maneuver to piece together something that resembles the president’s dream. If the DFC can’t be turned into a universal war insurer, the administration will hunt for a substitute that sounds close enough—probably something more narrow, conditional, and bureaucratic than what the president initially claimed.
That’s how you end up with government by improvisation, where the public is supposed to treat the revised and less fantastical version as proof that Trump’s original pronouncement was true—and where the legal and accountability questions keep accumulating because the governing style relies on answering them after the fact.