US President Donald Trump's dramatic announcement of a new and comprehensive tariff plan has shaken global markets and is raising concerns in Israel's Ministry of Finance. This morning Minister of Finance Bezalel Smotrich will convene a meeting of senior officials to discuss "the implications of the decision for the State of Israel and the examination of the necessary follow-up steps," according to the Ministry's statement. For Israel, the new reality poses a special challenge - the US is the main export destination for Israeli goods, and more than 25% of all Israeli goods exports are sold there.
What is Israel's status in the tariff plan?
According to the US announcement, Israeli products will be subject to a 17% tariff, which is calculated according to the trade deficit between the two countries - in other words the difference between the export of goods from Israel to the US and the import of goods to Israel from the US.
The difference is relatively low compared with China (54%), the EU (20%), Japan (24%), and India (26%) but is higher than the basic tariffs that will be charged on many other countries including Turkey. Other countries that come out cheaply from Trump's new tariffs are the UK, Saudi Arabia, Singapore, Brazil, and the UAE.
How important is the US for Israeli exports?
The US is without doubt Israel's main and most important export country. Israeli exports of goods to the US last year amounted to $17.3 billion, which constitutes about 26% of total Israeli goods exports (excluding exports of services). In comparison, exports to the second country on the list, Ireland, amount to only $3.2 billion and China is in third place with $2.8 billion.
Have Israel's recent moves to reduce tariffs been effective?
Israel has made two major moves in recent days to improve its position. One is the complete abolition of tariffs on imports from the US, and the second is the expansion of import reform to include US standards.
However, the moves were made by the government at the last minute. The cancellation of tariffs by Israel was made on the eve of Trump's announcement and still requires legislation in the Knesset, so it will not be mentioned at all in the US report in the chapter on Israel.
The Ministry of Finance estimates that these steps may assist in the negotiation phase with the US administration. According to information in the Ministry of Finance's possession, the Americans are open to talks with various countries to cut tariffs with a minimum threshold of 10%. In any case, unlike the EU and other countries, Israel certainly does not plan to impose retaliatory tariffs on US products.
What steps does Israel plan to take next?
Professional teams at the Ministry of Finance have already begun examining which industries and factories could be most significantly affected, and where government intervention is required. Smotrich has spoken with Manufacturers Association president Ron Tomer, and the parties will form an action plan.
At the same time, the Ministry of Finance recommends acting as soon as possible to open official negotiations with the US administration to reduce tariffs. Professional sources estimate that there is a chance of reducing the tariff rate, because the US administration has not yet taken into account the last-minute steps to eliminate Israeli tariffs, nor probably the expansion of the import reform.
What is the economic significance of the 17% duty on Israeli exports?
The potential blow is extremely significant. If we consider a 17% tariff on the volume of exports of goods from Israel to the US (about $17.3 billion in 2024), this amounts to a potential annual cost of approximately $2.9 billion. It is important to note that the tariffs apply mainly to goods and not services, so exports of services (mainly high-tech), which were $16.7 billion in 2024, will not be directly affected by the tariffs.
The cost from the tariff will directly hit the US consumer, assuming that exporters do not absorb the full cost of the price increase. The question is how will the price increase affect the competitiveness of Israeli products?
Will there also be opportunities for Israel in the new situation?
On the one hand, products made in Israel will become more expensive compared with domestic American products. On the other hand, the fact that the tariff on Israel (17%) is lower than that imposed on the EU (20%) and other countries may make some Israeli industries more attractive.
So despite the challenges, certain opportunities can also be identified. However, there is great uncertainty about the EU response and other countries to the US move, and how a global trade war may affect the global economy in general and the Israeli economy in particular.
What goods are exported from Israel to the US?
The imposition of tariffs on products from Israel poses a threat to key industries in the economy. According to the Central Bureau of Statistics, the main categories of exports to the US are electrical machinery and systems, medical and optical equipment, pharmaceuticals and diamonds.
Published by Globes, Israel business news - en.globes.co.il - on April 4, 2025.
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