Trump Tariffs Could Take Toll on Israeli Economy

While President Donald Trump’s new tariffs on steel and aluminum are directed mainly at China, Israel could suffer collateral economic damage from the policy as well.

Israel has asked to be exempted from the tariffs, along with Canada, Mexico, Brazil, South Korea, Argentina, and Australia, plus the European Union, who have been spared, at least initially.

Israel’s Ministry of Economy and Industry Foreign Trade Administration put in its request for an exemption with the International Trade Administration in the U.S. Department of Commerce, according to sources cited by Globes, on Tuesday.

The rationale for an exemption, besides Israel’s special relationship with Washington, is that Israeli metal exports to the U.S. are marginal, a mere $25 million annually, and thus pose no threat to the American economy. However, imposing restrictions on aluminum and steel exports to the U.S. and setting high customs duties will hurt many small and medium-sized Israeli companies.

And indirectly, it could be damaging; if other countries take retaliatory measures on American products, it could send metal costs spiraling upward. At the end of the line, Israeli consumers would pay more.

In response, Israeli analysts were gloomy though not grim.

“There are reasons to be worried,” Alex Zabezhinsky, chief economist at Meitav Dash investment house, told The Jerusalem Post. “At the end of the day, the prices of all kinds of [imported] commodities and foods will go up. And Israel, as an open economy that imports almost all kinds of rare materials, consumer goods and intermediate goods for industry, could be hurt because of increased import prices.”

“World trade is going to go down a little bit, and it’s going to hurt the Israeli economy,” Ori Greenfield, Psagot Investment House’s chief economist and strategist, told the Post. “Usually, countries like Israel – small economies with a large proportion of exports in the GDP – are the ones that get hurt first.”

The Israel Metal Industries Association in the Manufacturers Association of Israel said that 50-60 companies in Israel would be affected by such tariffs. “The U.S. should exempt us from this measure in the name of friendship between the two countries and our common interests,” a senior Manufacturers Association source said.

“At this stage, it is very difficult to assess the chances that the U.S. administration will grant Israel’s request. The chances look 50-50 right now, and it is likely to take several weeks before a decision is made one way or the other,” the source told Globes.