Israeli officers assured on US tariff concessions

About half-hour into the press convention within the Oval Workplace, with Prime Minister Benjamin Netanyahu sitting on his proper, US President Donald Trump offered his first touch upon the query that has been casting a shadow over the Israeli economic system over the previous week. Will Israel be granted reduction from Trump’s tariff plan, or is the 17% tariff on Israeli items the ultimate phrase?

Trump’s reply was quick, ambiguous, and noncommittal. As befits a businessman at first of talks value trillions of {dollars} with international locations all over the world, through which Israel is only a minnow, he mentioned, “We’re speaking about a complete new commerce settlement,” he started, turning his head towards Netanyahu, in a second of optimism on the Israeli facet. Then, Trump interrupted himself mid-sentence, tilted his head in the wrong way, and mentioned: “Perhaps not. Don’t neglect we assist Israel quite a bit. We give Israel $4 billion a yr. That’s quite a bit,” referring to US navy assist to Israel.

Senior officers alongside the politicians

Within the coming days, contacts will start between senior officers at Israel’s Ministry of Finance and Ministry of Economic system and their counterparts in Washington. Nevertheless, the dynamics of the dialogue on tariffs with the US administration are extremely centralized. The understanding on the Israeli facet is that President Trump reserves the only authority to resolve on the problem. The US Secretary of Commerce, Howard Lutnick, a Jew who loves Israel and is in command of Trump’s tariff plan and met with Netanyahu individually, can solely transfer ahead up to now, however the choices stay within the palms of the president himself.

Thus, talks between Israel and the US are anticipated to proceed on two parallel tracks: the primary observe is knowledgeable dialogue between officers at Israel’s Ministries of Economic system and Finance and the US Division of Commerce – right here the technical particulars might be mentioned. For instance, clarifying the query marks about merchandise on the seam between companies which might be exempt from customs duties and items that might be topic to customs duties. That is primarily related within the tech trade, which is meant to be largely excluded, however there isn’t a readability, for instance, concerning {hardware} related to software program and cybersecurity companies.

On this regard, key points that come up are US calls for on reciprocal procurement: a mechanism through which the Israeli authorities requires international firms that win tenders in Israel to purchase a part of their manufacturing from native suppliers. The Individuals see this mechanism as an impediment for his or her firms, particularly small and medium-sized companies which have problem assembly these necessities.

The second observe is a direct political channel between the Prime Minister’s Workplace and the White Home. Right here, strategic choices are mentioned, and on this case, the problem of tariffs as effectively, however not in isolation however as a part of a broader set of mutual pursuits.

Concessions in alternate for political strikes?

The truth that senior officers from the Ministry of Finance didn’t accompany Netanyahu on his go to to Washington signifies the character of the assembly. Minister of Finance Bezalel Smotrich additionally remained in Israel, though he wished to hitch the delegation to the White Home, because the individual straight answerable for dealing with the problem of tariffs and their implications for the Israeli economic system. The choice to maintain the skilled echelon in Israel was born from the understanding that the assembly was primarily political and diplomatic and never financial and technical. At this stage the dynamic is between the 2 leaders and never between the skilled groups.

Senior Israeli figures consider that behind closed doorways the assembly was extra constructive than within the public statements. Extra reassuring messages have been conveyed within the closed talks, maybe additionally indicators that there’s a method to attain an answer, however that the method might be gradual and can embrace calls for that Israel should fulfil.

The tariff negotiations usually are not being carried out in a vacuum. Israel and the US are in talks on a wide range of strategically essential points – from Iran and its nuclear program, to normalization efforts with Saudi Arabia, to the problem of the conflict and hostages in Gaza, and potential post-war preparations.

In discussions between two leaders with so many shared pursuits, an financial side akin to tariffs could also be built-in right into a broader cloth of offers. A closing deal could come within the type of a deal: tariff reduction from the US in alternate for progress on political tracks which might be essential to Trump.

In the end, from the attitude of the US administration, the primary objective of the tariff transfer is directed at main gamers within the international economic system, akin to China, the EU, and Japan. Israel is within the second tier of significance economically, however within the first tier politically, which can permit for relative flexibility.

A pointy fall in exports, hundreds of layoffs

Whereas the political echelons are engaged in negotiations and consider that an agreed answer may be reached, concern is rising within the enterprise sector. President of the Presidium of the Enterprise Sector Dubi Amitai, has forwarded an evaluation of the numerous dangers to the economic system to the Prime Minister, Minister of Finance, and Minister of Economic system.

The evaluation warns of diminished demand for Israeli merchandise within the US market because of their 17% improve in worth; injury to GDP development because of diminished exports, which represent a central element of GDP; job losses in export-oriented industries (about 10% of jobs in Israel rely on exports); discount in international funding in Israel; and the danger of closing companies or shifting operations from Israel overseas to bypass the tariffs. In his letter, Amitai wrote “We’re inspecting with concern the dangers to the Israeli economic system.” He beneficial that the federal government act “With nice warning, whereas understanding the context of the choice and the sensitivity of the material of relations with the US president.”

On the identical time, the Producers’ Affiliation has introduced worrying information: In line with an evaluation it has carried out, the brand new tariffs may result in a fall of $2.3 billion in annual Israeli exports to the US. Producers Affiliation president Ron Tomer warned that if further tariffs have been additionally imposed on the pharmaceutical and chip industries, that are at the moment exempt, the lower in exports would attain $3 billion. The Producers’ Affiliation pressured the human dimension of the disaster: between 18,000 and 26,000 Israeli staff in export-intensive industries may lose their jobs. The affect can be notably felt in industries akin to biotech merchandise, plastics and metals, chemical substances, robotics, and electronics.

Various query marks stay

A giant query mark hangs over different main industries. The diamond trade, which exports over 50% of its exports to the US, value about $3.5 billion a yr, continues to be ready for clarification on whether or not it will likely be exempted from the tariffs. Its exemption may additionally considerably cut back Israel’s commerce deficit with the US, on which the brand new tariff is calculated, to lower than 17%.

As for the protection industries, which represent a major pillar of Israeli exports to the US, it’s nonetheless unclear whether or not they are going to be exempted from the tariff coverage. On the one hand, their exclusion is smart as a result of shut safety cooperation between the international locations, however then again, there isn’t a official dedication to this.

In the meantime, the steps already introduced by the federal government – the abolition of all Israeli tariffs on US merchandise imported to Israel and growth of recognition of US requirements – are seen as gestures of goodwill that might help the method.

Printed by Globes, Israel enterprise information – en.globes.co.il – on April 8, 2025.

© Copyright of Globes Writer Itonut (1983) Ltd., 2025.