By Elizabeth Karpen, Unplugged
The US’ sweeping tariff policies against more than 90 countries took effect Aug. 7, slapping a 15% tariff on Israeli imports.
Israel had hoped to curb Trump’s tariffs when Prime Minister Benjamin Netanyahu announced the elimination of all tariffs on goods imported from the US and traveled to the White House. However, President Donald Trump still issued a 17% tariff on his self-declared “liberation day,” which was later lowered to 15%.
Israel, a longstanding ally of the US, now faces similar tariffs to fellow allies South Korea, Japan and the European Union. Some critics also blasted the 15% tariffs on countries the US has been in conflict with, such as Taliban-controlled Afghanistan.
The international duties are expected to raise prices on kosher food, Judaica and the country’s largest export: diamonds. Israel is expected to see a decline in its export market and tax revenue as a result.
If Trump goes ahead with his plan to levy heavy taxes on semiconductors, the effect will be felt even stronger in Israel.
What will the toll be on the Israeli economy — and for Jewish Americans looking to buy Israeli goods?
Israel’s response to Trump’s tariffs
The Israeli Finance Ministry has attempted to downplay the impact tariffs will have on the economy, explaining that the 15% rate is “at the lowest level among countries that have a trade deficit with the US.”
It says that the number “reflects the ongoing dialogue between Israel and the administration with the aim of reaching an improved agreement.”
Trump, who says that the sweeping tariffs are a necessity for the US to regain the world’s respect and correct trade imbalances, has been criticized by economists who claim that the taxes will negatively impact the global economy and cause prices for US consumers to rise.
In the US, Trump’s tariff policies and their uncertainty have been associated with the Federal Reserve’s refusal to lower interest rates, slower economic growth than expected in 2025, and underperforming jobs reports for months.
Since the initial tariffs were announced, Israel had hoped to negotiate the US down to 10%, but was unable to do so.
“Don’t forget, we help Israel a lot,” Trump said in the Oval Office with Netanyahu in April. “We give Israel $4 billion a year, that’s a lot.”
That month, the Manufacturers Assn. of Israel expressed concern that Trump’s tariffs would cause 26,000 Israelis to be laid off.
Israeli exports are expected to take a hit of $2-4 billion, according to Manufacturers Assn. President Ron Tomer.
Israel expects losses
A recent survey found that Israel would lose over $290 million in tax revenue as a result of the tariffs with “probable” job losses and a decrease in company revenues.
“At least a third of the exporters to the US have lowered their prices in the US to offset the hit to their competitiveness following the imposition of the tax,” the report found.
“While the reduction is only a few percentage points, this means a drop in the taxes they owe to Israel.”
Economist Shlomo Maoz told the Times of Israel that the tariffs will not severely impact the Israeli economy because similar tariffs are being applied to many other major economies.
“If they were to tax Israel only, we would have taken a hard hit, because exporting to the US would have stopped being competitive,” Maoz said. “But in a reality, the whole world is being taxed, and the rate for some countries is even higher. The damage to us will be relatively small.”
Tomer, however, says the opposite. He says that the tariffs will hurt the Israeli economy more than many others because it removed the competitive edge of a free trade agreement, which made it enticing for companies to move to or begin in Israel even though production costs are lower in many other countries.
“We may be in the same situation as many other countries, but we lost the benefit that we enjoyed with the free trade agreement and need to compete with countries such as Turkey, which has lower production costs than Israel. Without the comparative advantage, we are bound to lose sales.”
Israel’s status as “Startup Nation” will likely be threatened, he added, because more established countries with tech centers like Japan and Germany face the same tariffs, and the UK is only tariffed at 10%.
“We were in good trade negotiations with the US, and they were opening up to come in favor of Israel,” Tomer said. “For years, we had an advantage over many countries due to Israel’s free trade agreement, benefiting from zero duties while exporting to the US.
“Now, we have lost an advantage over Turkey, Japan, Britain and other countries.”
Kosher foods, Israeli imports
Tariffs are typically passed on to consumers through higher prices, as businesses adjust to maintain profit margins. If applied across the board, the 15% tariff on 2024’s $22.2 billion worth of Israeli goods would cost American consumers an estimated additional $3.3 billion.
Israel primarily imports precious stones and metals (mainly diamonds); pharmaceuticals; electrical and electronic equipment; and optical, photographic, technical and medical apparatus to the US.
Israel is estimated to have exported $5.43 billion to the US in diamonds in 2023, making up more than 10% of the American diamond market. The tariffs will likely see engagement rings and other fine jewelry increase in price.
Israeli tech exports, which make up 53% of exports to the US from the Jewish state, are not expected to be significantly impacted, since 70% of those exports are services, which will not be tariffed.
However, the 30% of goods that will be taxed, primarily industrial equipment and machinery, will face tariffs.
Defense equipment, which is 7.5% of Israel’s exports to the US, will face tariffs.
According to Tomer, exporters in Israel are struggling with how to proceed with tariffs. At 15%, he said, many are planning on placing at least some of the burden on American consumers in order to remain profitable.
“At 10% there was still room to share the burden with US customers. With a 15% rate, it’s more problematic and difficult to absorb the costs,” he said.
Trump has flirted with the idea of a 100% tariff on semiconductors produced by non-American companies.
If these tariffs extend to semiconductors and pharmaceutical components, Tomer estimates that anywhere from 20,000 to 33,000 Israelis will lose their jobs.
Kosher-certified foods, many of which are imported from Israel, are expected to rise in price. Judaica — including prayer items such as Torah scrolls, mezuzzahs and tefilin — may also see price hikes, given that many are crafted in Israel by specialized artisans and scribes or highly-specific factories.
While much of the kosher poultry consumed in the US is domestically raised, a significant portion of kosher beef is imported from countries like Uruguay, Argentina and Brazil, which were hit with 10%, 10%, and 50% tariffs, respectively, under Trump’s new trade policy.
Since American beef — both kosher and non-kosher — is more expensive due to higher production and labor costs, these tariffs are unlikely to make US meat the cheaper alternative.
In other words, kosher consumers may face higher prices across the board, regardless of whether the meat is imported or domestic.
Israel’s tariffs on the US
The Trump administration alleged that Israel imposed a 33% tariff on American goods. That claim is inaccurate.
Since the 1985 Israel-US Free Trade Agreement, 98% of US exports to Israel have entered the country duty-free. The remaining 2% — primarily agricultural products — accounted for only $11.3 million annually, according to Israel’s Finance Ministry.
“Today we canceled all of the customs duties levied on products from the US, Israel’s largest trading partner,” Netanyahu wrote on X.
“Canceling the customs duties on American goods is an additional step in the policy that my governments have led for a decade in opening up the market to competition.”
The move is widely viewed as a goodwill gesture aimed at reinforcing economic ties — a gesture that now appears to have gone unreciprocated. X owner Elon Musk, a former Trump ally, reacted with a minimalist post: two emojis — an American flag and an Israeli flag.
Reciprocity
The Trump administration framed the new tariffs as part of a broader effort to reduce trade deficits and correct the “lack of reciprocity in our bilateral trade relationships.”
“These tariffs will remain in effect until such a time as President Trump determines that the threat posed by the trade deficit and underlying nonreciprocal treatment is satisfied, resolved or mitigated,” the White House said.
Another White House official had a different hypothesis for the focus on Israel ahead of the announcement:
“Israel steals a lot of intellectual property from, for example, the pharmaceutical manufacturers in this country.” No evidence was provided to substantiate this allegation.
In 2024, the US imported $22.2 billion in goods from Israel while exporting $14.8 billion — a trade imbalance of $8.2 billion. While significant, the broader context tells a different story: Roughly one in every 10 products imported by Israel comes from the US.
