It is not legal from what I can see. As far as cause to the wear I would say ots most likely a loose bearing, but could also be caused by axle flex... Especially if the trailer is equiped with a light weight axle. Light weight axles use a thinner metal tube for the main body of the axle and are more prone to flex.
Thanks for all the feedback! I'm actually not a newbie and new for a fact the tire was in no way legal. Just wanted some other input to show owner. Owner refused to fix so I took his truck back to him and shook his hand goodbye. He's just running the truck into the ground.