Opinion
Will Trump lower Israel’s tariffs?
Netanyahu is hoping that he can get a deal with the American president
April 8, 2025 15:093 min read
Netanyahu is hoping that he can get a deal with the American president
April 8, 2025 15:09President Donald Trump reminded everyone he’s a wild card. Rather than tinker around the edges, he overturned decades of US economic policy last week. Trump announced “reciprocal tariffs” on America’s friends and foes alike, Israel included.
Trump’s huge change generated a seismic reaction. While his base remained trusting and supportive, financial markets, foreign governments and American economists reacted very negatively.
Interviewed by fellow conservative Hoover Institution scholar Peter Robinson, legendary economist Thomas Sowell said, “It’s painful to see what a ruinous decision – from back in the 1920s – being repeated,” referencing Americans’ last major embrace of tariffs. He allowed that Trump could be “using these tariffs to get very strategic things settled,” but remained concerned about a possible “worldwide trade war,” because then “everybody loses.”
It’s a problem that the administration’s tariff logic remains hazy. As National Review’s Jim Geraghty wrote, the White House senior counsellor on trade and manufacturing, National Economic Council director, Treasury Secretary, and Commerce Secretary, “all went out to the Sunday [political talk] shows to make the case for the sweeping new tariffs … All of them made the case for the president’s decision. The only catch is that almost all of their arguments contradicted each other.” So Americans can keep debating whether tariffs are a negotiation tactic to make free trade fairer (as defined by President Trump) or a deliberate shift toward protectionism and overhauling American taxation.
Interestingly, those outside the administration sound more unified, specifically about tariff calculations. The conservative American Enterprise Institute published an analysis by Senior Fellows Kevin Corinth and Stan Veuger that observed these tariffs aren’t reciprocal; “even if the United States has no trade deficit (or a trade surplus) with a country, they still receive a minimum tariff of 10 per cent.”
Corinth and Veuger continued, “The formula for the tariffs… published by the Office of the United States Trade Representative, does not make economic sense” and mistakenly results in tariffs approximately four times too high. In closing, they zing, “our view is that the formula the administration relied on has no foundation in either economic theory or trade law. But if we are going to
pretend that it is a sound basis for US trade policy, we should at least be allowed to expect that the relevant White House officials do their calculations carefully.”
Two of the authors of that cited paper publicly agreed the administration’s calculations didn’t track. One co-author, Biden administration Treasury official and University of Chicago Professor Brent Neiman, wrote in The New York Times that the Trump administration “got it wrong. Very wrong. I disagree fundamentally with the government’s trade policy and approach. But even taking it at face value, our findings suggest the calculated tariffs should be dramatically smaller – perhaps one-fourth as large.”
The tariff rates may be erroneously inflated, but they have real world implications. For example, Trump announced a 17 per cent tariff on Israel, even though Israel eliminated tariffs on imports from the US last Tuesday. As Jewish Insider reported, “Ninety nine per cent [of imports from the US] had been tariff-free since the countries signed a free-trade agreement in 1985.”
There are three problems with the new tariff rate on Israel then. First, according to AEI, Israel should have been assigned the administration’s minimum 10 per cent tariff, not 17 per cent. Second, even the 10 per cent number isn’t reciprocal, after Israel’s already zeroed out tariffs. Third, why punish an ally that’s demonstrated a commitment to free trade?
Politico reported, “The US is Israel’s single largest trading partner, and the country is expected to lose about $2.3 billion from the US tariffs, according to the Manufacturers Association of Israel, with the biggest hit coming to Israel’s technology sector.”
Recognising how crucial this trading relationship is to his country, Prime Minister Benjamin Netanyahu flew to Washington. After meeting with Trump on Monday, Netanyahu told the media, “We will eliminate the trade deficit with the United States. We intend to do it very quickly. We think it’s the right thing to do. And we’re going to also eliminate trade barriers …and I think Israel can serve as a model for many countries who ought to do the same.”
But how can a country of nearly 10 million people eliminate its trade deficit with a wealthy country of 340 million? In fairness, Netanyahu was responding to an illogical tariff rate, but hopefully logic will prevail.
Trump should reciprocate Israel’s tariff elimination. That’s something both leaders could claim as a win.
