Israeli Finance Minister Bezalel Smotrich announced and signed a plan to eliminate any remaining tariffs targeting U.S. imports. The move came in advance of Donald Trump's announcement on Wednesday that a new schedule of duties would be imposed on foreign products.
Israel and the U.S. have had a free trade agreement since 1985 that excludes about 98% of American products from Israeli tariffs. Israeli Prime Minister Benjamin Netanyahu appears to be trying to get out in front of any possible announcement on tariffs on Israel from the White House.
“Today we canceled all of the customs duties levied on products from the U.S., Israel’s largest trading partner,” Netanyahu said in a post on X. “Canceling the customs duties on American goods is an additional step in the policy that my government has led for a decade in opening up the market to competition.”
The lifting of tariffs on U.S. goods still needs approval of the Knesset, where it's expected to pass.
Total U.S. trade with Israel amounted to an estimated $37 billion in 2024, and the U.S. bilateral deficit stood at $7.4 billion, an 8.6 percent increase over the previous year, according to U.S. trade data. Israeli import taxes on U.S. goods amount to $11.3 million annually, with most levied on food, according to Israel’s finance ministry.
Israel isn't the only nation trying to forestall Trump's action on tariffs directed against it. Previously, Mexico sent cartel leaders across the border to stand trial in the U.S. It also sent troops to the border to break up fentanyl rings. Other responses weren't very friendly.
Canada, the European Union, and China imposed retaliatory tariffs on U.S. goods even before Trump's official announcement. Unless Trump withdraws or modifies his threats of high tariffs, prices of many consumer goods will rise.
Smotrich is calculating that Trump will reciprocate and lower trade barriers to Israeli goods.
Smotrich’s initiative will still have to be approved by the Israeli Knesset, where agricultural interests enjoy significant influence. There will be a rearguard action in the effort to defend the protectionist schemes from which Israeli farmers benefit. But while the Smotrich plan is not a done deal, Israel’s vital security interests depend so heavily on American support that Israeli domestic interests may have to take a back seat to its near-term foreign policy objectives.
If Trump’s true objective is to compel America’s trading partners to drop their tariffs, to which he would respond by lowering America’s trade barriers, Israel’s maneuver should compel the administration to make some concessions. The American trade balance with Israel isn’t enormous, but it’s not nothing, either. The U.S. imports Israeli commodities like stone, metals, and glass, but it also takes in finished Israeli products like industrial machinery, chemicals, plastics, and rubber.
The tariffs are a calculated gamble by Trump, hoping to jump-start U.S. exports in a less restrictive, more competitive international trade atmosphere. If it works, it will revolutionize the American economy. If it doesn't, we may be paying a lot more for everything we buy from overseas.
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