Decision blindsides Jerusalem, which had just dropped all duties on US imports, triggering alarm among exporters and policymakers: American decision reflects Israeli trade deficit and follows formula applied internationally. But that doesn’t take away the sting.
In a move that has sparked anger and confusion in Jerusalem, the United States announced a sweeping new tariff policy that includes a 17% duty on Israeli exports. This comes just 24 hours after Israel unilaterally dropped all tariffs on American imports, aiming to bolster its alliance with Washington and reduce domestic consumer prices.
Prime Minister Benjamin Netanyahu had hailed the removal of Israeli duties on U.S. goods as a “milestone” in the Israel-U.S. trade relationship, promising economic benefits to Israeli consumers and closer bilateral ties. But the sudden imposition of new American tariffs has cast a shadow over those hopes, with Israeli leaders scrambling to understand the logic behind the move—and how to respond.
The Formula Behind the Blow
According to U.S. officials, the new tariff structure is not country-specific but part of a global effort to reduce America’s trade deficit. The Trump administration revived a formula that calculates tariffs based on a country’s trade surplus with the U.S.
In Israel’s case, the numbers were straightforward. The U.S. imports roughly $20 billion worth of goods from Israel annually, while exporting around $13 billion in return. That leaves a $7 billion trade surplus in Israel’s favor. The 17% tariff was derived by dividing that surplus ($7B) by total imports from Israel ($20B), yielding 0.35, and then halving it—producing 17.5%, which was rounded down to 17%.
Trade officials in Washington insisted the policy is “mathematically fair” and aimed at encouraging balanced trade, not punishing allies. But for Israel, the timing was galling.
Jerusalem Caught Off Guard
Finance Minister Bezalel Smotrich said the announcement “took us by surprise,” especially in light of Israel’s goodwill gesture of eliminating all tariffs on U.S. imports. “We acted to strengthen the bond with our closest ally. Instead, we’ve been handed a blow that endangers key sectors of our economy,” he stated.
The Finance Ministry has launched an internal review to assess the impact on Israeli industries and identify potential countermeasures or diplomatic responses. Early assessments suggest the tariff could hit exporters hard, particularly in high-tech, medical devices, defense components, and polished diamonds.
Industry Voices Raise Alarm
Ron Tomer, President of the Manufacturers Association of Israel, warned the new tariffs would “shake the foundation” of Israel’s export-driven economy. “This is not just a tax. It’s a message,” he said. “It tells Israeli exporters that access to the U.S. market—a cornerstone of our economic model—is no longer guaranteed.”
He urged the government to immediately enter negotiations with Washington and consider filing an appeal under existing bilateral trade agreements.
Exporters in the diamond industry, already under pressure from declining global demand and competition from synthetic stones, said a 17% tariff would make their products uncompetitive in the critical U.S. market. Medical device companies, many of which rely on U.S. hospitals and distributors, are also concerned that price hikes could reduce demand or shift purchasing to Asian competitors.
Economic and Political Fallout
The episode has triggered political blowback within Israel. Critics accused the government of acting too hastily in scrapping import duties without securing a reciprocal commitment from the U.S. Some questioned whether Netanyahu had relied on verbal assurances from allies in Washington without locking down a written agreement.
Others blamed the Trump administration’s transactional approach to diplomacy and trade, saying it views trade deficits as debts that must be settled—regardless of strategic alliances.
While the U.S. tariffs apply to many countries, the specific application to Israel—right after a gesture of goodwill—has stung harder. It also highlights the limited leverage smaller nations have in the face of America’s shifting economic doctrine.
What Comes Next
The Israeli government is expected to dispatch envoys to Washington to seek exemptions or alternative arrangements. Some officials are quietly discussing the reintroduction of certain tariffs on American goods as leverage, though doing so could inflame tensions.
For now, exporters are bracing for impact. Shipments scheduled for May and June may already be subject to the new duties, affecting contracts signed months ago.
“It’s not just about the numbers,” said one senior Israeli trade official. “It’s about trust—and that’s harder to repair than a tariff ledger.”
If Trump was smart he would adjust this and make it reciprocal. Not just fair to Israel but sends a message to everyone else that they could perhaps dot he same. This whole thing is crazy.