Israel eliminates all tariffs on American goods, strengthening economic ties with the United States while anticipating President Trump’s new reciprocal levy plan against nations that impose tariffs on American products.
Quick Takes
- Israel has officially announced the elimination of all remaining tariffs on American goods, significantly expanding a 40-year-old free trade agreement that already made 99% of U.S. products tax-free.
- The decision comes strategically ahead of President Trump’s “Liberation Day” plan to impose reciprocal tariffs on U.S. trading partners that maintain levies on American products.
- Bilateral trade between the U.S. and Israel reached approximately $37 billion in 2024, with Israel imposing over $11.3 million annually in customs duties primarily on agricultural products.
- Israeli leadership emphasized that removing tariffs will increase market competition, diversify available products, and help lower living costs for Israeli citizens.
- The directive still requires formal approval from the Knesset Finance Committee and the Economy and Industry Minister before implementation.
Strategic Economic Alliance
Israel has moved to eliminate all remaining tariffs on American goods, marking a significant enhancement in trade relations between the two allies. The decision reinforces Israel’s position as America’s strongest Middle Eastern ally and comes at a strategic moment – just before President Trump’s planned rollout of reciprocal tariffs against nations that maintain duties on American products. The United States stands as Israel’s largest trading partner, with bilateral trade valued at approximately $37 billion in 2024 – consisting of $22.2 billion in U.S. imports from Israel and $14.8 billion in exports to Israel.
Prime Minister Benjamin Netanyahu emphasized the dual benefits of this economic policy shift. “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, introducing variety to the economy, and lowering the cost of living,” Netanyahu stated. “In addition to the economic advantages to the market and to the citizens of Israel, the current effort will allow us to further strengthen the alliance and ties between Israel and the US.”
Building on 40 Years of Trade Relations
The relationship between the United States and Israel has been governed by a free trade agreement signed nearly 40 years ago, which eliminated tariffs on 99% of American goods entering the Israeli market. The remaining 1% primarily affects agricultural products including fruits, vegetables, and other farmed goods. Israel currently imposes over $11.3 million annually in customs duties on American products, a figure that will drop to zero pending required approvals from the Knesset Finance Committee and Economy Minister Nir Barkat.
“Fully eliminating tariffs on imports from the US is an important step to safeguard the Israeli economy during a sensitive period and to strengthen the economic relationship with our most important ally – the US,” said Finance Minister Bezalel Smotrich. “We will continue to act decisively to protect Israeli exports and preserve the competitive advantages of Israel in the international arena.”
Preemptive Move Ahead of Liberation Day
The timing of Israel’s announcement appears directly connected to President Trump’s planned implementation of his “Liberation Day” tariff policy. This policy will apply reciprocal tariffs to nations based on the duties they impose on American goods. By eliminating all tariffs on U.S. products, Israel has positioned itself to avoid potential retaliatory measures while simultaneously strengthening its economic partnership with America. Market analysts have noted this move represents a shrewd diplomatic and economic strategy by the Netanyahu government.
“The current administration presents a real opportunity to shape a new strategic economic future for the two countries while strengthening Israel’s central role as an economic partner,” Smotrich noted in his public statements regarding the policy shift.
Agricultural Impacts and Implementation Challenges
Economic experts caution that the complete elimination of agricultural tariffs will require the Israeli government to develop new domestic policies to support local producers. Dan Catarivas, an economic analyst familiar with Israeli trade policy, explained the reasoning behind the previously maintained tariffs. “The remaining tariffs are in place partly because we don’t want to be flooded by cheap agricultural products and to protect the local agricultural industry, which means that a removal of the tariffs will require the Israeli government to come up with an agricultural policy to support local producers,” said Catarivas.
The zero-tariff directive represents what Finance Minister Smotrich describes as a commitment to a “zero-tariff policy” designed to maintain positive trade relations with the United States. While the economic implications for Israeli consumers include potentially lower prices and greater product variety, domestic agricultural producers may face increased competition from American imports, necessitating additional policy measures to ensure their continued viability.
Bill Ackman, a prominent American investor and Trump supporter, praised Israel’s preemptive action, suggesting it provides a model for other nations. “Israel sets the example on how all of our allies should preemptively respond to President Trump’s desire to level the tariff playing field for America,” Ackman stated in response to the announcement.
