United States imposes customs tariffs on imports of Israeli products

On April 2, 2025, the President of the United States signed an Executive Order announcing the imposition of very extensive customs tariffs on products being imported into the United States. Following is a quick analysis of the implications of the order on Israeli manufacturers in various sectors of the economy.

What does the imposition of US tariffs involve?

The US tariffs are imposed at three levels:

• On April 5: an overall tariff of 10% will be imposed on all products entering the United States from all countries worldwide, apart from a few exceptions (specified below);
• On April 9: a “special” tariff will be imposed on countries that the Americans believe unnecessarily restrict imports from the United States. This list includes many countries in East Asia (China, Thailand, Vietnam, South Korea, and Japan); European Union member states; as well as Israel. A special 17% tariff was imposed on Israel (instead of 10%).
• Numerous products were excluded from the Executive Order. These include minerals, medical products and particular semiconductor products.

What are the reasons for imposing the tariff?

The main reasons for imposing the tariffs are a response to the allegation of discrimination against American exports, and a response to the allegation that other countries impose tariffs and restrictions at a much higher rate.

Another reason that was given was that the United States must restore its manufacturing capacity.

How is the tariff calculated? After all, Israel announced that it is canceling all tariffs on American products

An examination of the formal customs rate does not reveal the entirety of the restrictions being imposed on imports into the country. There are also regulatory restrictions (such as standards) and assistance being provided to local manufacturers and other restrictions on imports. For this reason, the special tariff rate was calculated as a derivative of the trade deficit between Israel and the United States, as a percentage of the total trade.

Obviously, this method of calculation is very problematic because it does not take into account the fact that a significant share of the trade disparities do not derive from discrimination against American products, but simply because it is less expensive to manufacture particular products in particular countries. For example, labor-intensive products are cheaper to manufacture in countries where labor is cheaper.

Is there any way to lower the tariff on Israeli products?

The Executive Order explicitly states that the president intends to change the tariff rates after negotiating with countries. We can assume that Israel will enter into such negotiations. One example of a change that Israel can make is to recognize American standards for the purposes of the “What’s Good for Europe is Good for Israel” reform that came into effect just recently. In fact, it is possible that it was a mistake to not recognize American standards as being adequate for this reform.

Hopefully, proper management of the negotiations might achieve a lowering of the tariff to at least 10%.

Does the imposition of the tariff offer any advantages for Israeli manufacturers?

The imposition of tariffs should be viewed from a relative perspective. The tariff imposed on Israel (especially if it is lowered to 10%) is very low compared to the tariff imposed on China (34%, in addition to the 25% already imposed), and is also lower than the tariff imposed on other countries, such as Japan (24%), South Korea (26%) and European Union member states (20%). The outcome might be that, for particular products, manufacturing may be diverted to Israel from other countries whose products are subject to high tariffs.

What is the impact on the Israeli high-tech sector?

A significant share of the high-tech sector in Israel is built on services being provided to various companies (such as the cloud security industry). This industry is not subject to the new tariffs at this stage. At the moment, the entire R&D sector is also not subject to tariffs.  The Executive Order also exempts particular products (such as semiconductors and particular medicines) from customs tariffs.

Obviously, the main planned impact of the imposed tariffs is to transfer manufacturing sectors to the United States. Israeli companies might have to relocate some of their production lines to the United States.

As usual, every company’s situation is different, and we are at your service to advise you about the alternatives available to companies and the applicable rules.

***

Prof. Amichai Cohen, a special counsel on international law at our firm, is at your service for any advice regarding the newly imposed customs tariffs on imports of Israeli products.