Israeli exports of goods to the United States faced a 15% tariff as new measures announced by U.S. President Donald Trump took effect on Thursday, 7 August. Israeli officials had warned that the change could lead to reduced export volumes, job losses, and lower corporate tax revenues.
Israel had sought to secure a lower rate of 10%, down from the initially proposed 17%, to retain a competitive edge over countries facing higher tariffs. Negotiations for special consideration were unsuccessful.
"We may be in the same situation as many other countries are, but we lost the benefit that we enjoyed with the free trade agreement and need to compete with countries such as Turkey, which previously paid taxes and has lower production costs than Israel," said Ron Tomer, president of the Israel Manufacturers Association. "Without the comparative advantage, we are bound to lose sales."
The tariffs were projected to reduce Israeli exports by $2 billion to $4 billion annually. If pharmaceuticals and semiconductor components were included, an estimated 20,000 to 33,000 jobs could be at risk.
Israel had benefited from zero duties under its free trade agreement with the U.S. "Now, we have lost an advantage over Turkey, Japan, Britain, and other countries," said Tomer.
Trump's broader tariff measures, announced in April, set rates from 10% to around 40% for goods from dozens of countries. The U.S. increased tariffs on Canada to 35% while agreeing to 10% levies for Britain and trade deals with South Korea and the EU. Israel's 15% rate was shared by Japan, Turkey, Iceland, Norway, Fiji, Ghana, Guyana, and Ecuador.
In 2024, total trade in goods between Israel and the U.S. was worth about $37 billion, with Israel exporting $22.2 billion and importing $14.8 billion. Defense products accounted for about 7.5% of Israel's exports and were affected, while most tech exports were not, as tariffs did not apply to services. The impact on the 30% of tech exports that are physical goods remains under review.
"If negotiations with the U.S. do not give Israeli exporters waivers on import taxes on these goods to the U.S., then we are going to lose a lot more of our business activities, with annual losses estimated at least $4 billion," said Tomer.
Exporters considered options such as price increases, reduced margins, or shifting production to the U.S. "If the tariff will be lowered to 10% it is hard for me to see that they will open factories in the U.S., but if it stays at 15% then in the long term it may be an option," said Kobi Zalicha, managing partner at Moore Israel – Lion, Orlitzky & Co.
Source: The Times of Israel