Israel formulates measures to cut planned US tariff

Israel’s Minister of Finance Bezalel Smotrich, Ministry of Finance director general Ilan Rom and chief economist Shmuel Abramzon today held final consultations on the issue of dealing with the Trump administration’s tariff plan. This evening, they will hold a follow-up call with Prime Minister Benjamin Netanyahu, as part of preparations for negotiations with the US.

The Ministry of Finance aims to send two delegations to Washington. The first delegation will consist of professional teams and will fly as soon as possible for talks with their counterparts in the Trump administration. Later, a second delegation will fly out to the US capital, headed by Smotrich himself, to complete the deal. The decision on the composition of the first delegation to the US and its timing will be decided by Netanyahu, while Minister of Economy and Industry Nir Barkat is also interested in participating in the talks in the US.

The 17% tariff imposed on goods from Israel is seen by the Ministry of Finance as a high starting point for negotiations. The level of the tariff, it appears, will be determined not only according to the dry formula presented by the Americans in recent weeks.

Technically, the US calculates the tariff rate for each country based on its trade deficit with it. In other words, the more a country sells to the US than it buys, the higher the tariff rate that will be imposed on it.

Netanyahu said at the joint press conference with US President Donald Trump that Israel will work to reduce the trade deficit. Assuming that Israel does not want to export less, it will have to import more.

Israel has already announced cancelation of the few tariffs that existed on US goods and the transfer of the import reform from Europe to imports from the US. But this is not enough to significantly lower the tariff.

The Ministry of Finance is not even trying to estimate how many percent points of customs duties Israel will save as a result of each of the announced measures and others on the agenda, such as the cancelation of the requirement for reciprocal procurement. This is with the understanding that the actual customs duty will be set in talks, in one package or another, and not according to a simple formula.

Will bureaucracy be reduced?

If the customs duty imposed on Israel is not determined solely by the dry figure of the trade deficit, what else could determine the final tariff? The answer may lie in dealing with bureaucracy.

Every business in Israel is familiar with labyrinthine Israeli bureaucracy, which also has a notorious reputation with US companies. The chapter dedicated to Israel in the Trump administration’s tariff plan report pointed to a series of requirements and regulations that make it difficult for US companies to do business in Israel. These include a lack of regulatory transparency, arbitrary standardization, and draconian requirements in government tenders. It all sounds familiar to Israeli ears too.

In a short time, the US could now bring about a reduction in bureaucracy, which all the protests by public committees and proposed reforms to open up competition in Israel over many years, have failed to achieve.

The main points in the raft of measures and benefits that Israel will offer to the Americans during their visit to Washington are based on the comments in the US administration’s report. Israel is trying to provide a response to each of the issues raised, including the bureaucratic aspect.

For example, US companies have complained that updates to food legislation are only available to subscribers to a private legal database, which creates a lack of clarity for US exporters on future regulatory requirements. Another claim is the lack of access to defense procurement in Israel due to requirements for local agents or local bank accounts, in contrast to the accessibility given to Israeli companies in the US market. In e-commerce, hardship lies in Israeli restrictions on the transfer of data across borders, which make digital business activity difficult.

All of these barriers will have to be addressed in Israel in order to gain relief in the tariff program, although is possible that the easing of Israeli bureaucracy will only serve the US.

Published by Globes, Israel business news – en.globes.co.il – on April 20, 2025.

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