Trump's trade wars: How will Israel respond?

With President Trump set to impose an unknown increase in tariff rates on countries around the world, Israel is seeking an alternative to potentially ruinous trade wars: fully free trade with the United States.

The Finance Ministry released the following statement today (Tuesday) outlining Minister Smotrich's plan to lower trade barriers on Israel's end, stating that this policy change comes from Prime Minister Netanyahu:

"In accordance with the Prime Minister’s policy, Finance Minister Bezalel Smotrich appealed to Economy Minister Nir Barkat and Agriculture Minister Avi Dichter, requesting immediate action to advance the removal of customs duties on products from the United States, consistent with the agreement to establish a free trade zone signed between the countries in 1985.

"In a letter sent on March 20, Smotrich noted that he sees the current administration as a genuine opportunity to shape a new strategic economic future for the countries, while strengthening the global leadership of the U.S. and Israel’s central role as an economic partner. The Finance Minister further emphasized the great importance he attaches to deepening economic cooperation, promoting innovation, and reinforcing financial and commercial ties between the countries, as recently declared by the U.S. and Israeli Treasuries.

"Lowering taxes will benefit the State of Israel, align with the government’s policy to combat the high cost of living, and even increase competition in the food sector."

Smotrich placed a particular emphasis on how little Israel gains from tariffs on American goods compared to the potential losses from a trade war: "According to an examination by the Israel Tax Authority and the Chief Economist Division at the Treasury, customs revenue from imports from the U.S. currently amounts to only about 42 million shekels per year, with the main relevant customs items falling under agricultural categories. The goal of this move is to promote a zero-tariff policy between the countries and maintain positive trade relations with the U.S."

Netanyahu and Smotrich face an uphill battle in moving to remove agricultural and other tariffs, which have traditionally been fiercely resisted by local farmers and businesses who fear foreign competition, and whose electoral power and numbers in a sharply divided country could swing the election in 2026.

UPDATE: Smotrich has signed the order abolishing tariffs on American goods. It must now be approved by the Knesset Finance Committee to go into effect.