2025 Year-End Review: International Law and Its Impact on the Israeli Business Sector

In 2025, several significant changes took place in the international trade arena that directly impacted Israeli companies operating in global and domestic markets. The prevailing trend was a steep rise in regulatory uncertainty, deriving primarily from the US administration’s aggressive tariff policy, far-reaching import reforms, stricter enforcement of competition law, and international sanctions. For Israeli society, 2025 underscored the need to quickly adapt to changing rules, including trade becoming a tool for political and economic leverage.

US Trade Policy: Tariffs, Uncertainty, and Legal Battles

Throughout the year, the US administration launched a broad-scale policy of imposing tariffs aimed at returning manufacturing to the US.

Tariffs and import restrictions: Tariffs of at least 10%, and in many cases significantly higher, were imposed on imports from countries worldwide into the United States, with rates varying by country. A 15% tariff was imposed on goods imported from Israel to the United States (but not on services, such as computer services). In addition, the US canceled the de minimis exemption for low-value imports from China (lower than USD 800) to further promote American manufacturing over foreign manufacturing.

The US also imposed special tariffs of 25% to 100% on a variety of branded pharmaceuticals, furniture, steel, aluminum, and vehicles. Relief was granted to prevent double tariffs between vehicles and raw materials (steel and aluminum).

Doubt as to the legality of the tariffs: The US Federal Court of Appeals issued a landmark ruling that most of President Trump’s tariffs are unlawful, since Congress is vested with exclusive authority to impose taxes. However, the court left the tariffs in place for the time being, until the US Supreme Court issues its ruling.

Rules of origin and “substantial transformation”: In principle, a product is deemed to originate from a particular country only if it has undergone a “substantial transformation” there. For Israeli manufacturers to benefit from the free trade agreement, their domestic manufacturing costs must exceed 35% of the product’s value.

Import and Competition Landscape in Israel: Balancing Between Protecting Manufacturers and Lowering the Cost of Living

The State of Israel sought to strike a balance between opening the market to imports and protecting local industries amid geopolitical pressure.

“What’s good for Europe is good for Israel” reform: This government initiative seeks to ease product imports by adopting international standards and removing bureaucratic obstacles at ports. The reform enables imports based on importers’ declarations of compliance with foreign regulations and reliance on European standards. The reform was recently expanded to include US standards as well, to safeguard Israel’s trade relations with the United States. However, the reform also has downsides, such as adverse impacts on Israeli manufacturing and some loss of regulatory sovereignty.

Anti-dumping levies on aluminum: The Commissioner of Trade Levies imposed a temporary guarantee on aluminum imports from China (ranging from 61%-146%) due to suspicions of unfair trade. A month later, the Competition Authority expressed strong opposition to the move, arguing that the three cumulative conditions required by law to impose the levy were not met. According to the Competition Authority, the measure could trigger hikes in real estate prices due to higher import costs and harm competition in the economy.

International Enforcement, Sanctions, and Immunities

Regulatory and tort law developments posed new challenges at the international level.

US and EU sanctions: Against the backdrop of the prolonged war between Russia and Ukraine and the ongoing battle for international dominance between the United States and China, international sanctions remained a major factor influencing global trade. US authorities considerably broadened sanctions lists, export-restricted products, and enforcement efforts. Inter alia, the international application of sanctions was expanded in a way that also adversely impacts Israeli companies trading with Russia and China, as well as many products manufactured in Israel. The European Union also substantially expanded the scope of sanctions imposed on trade with Russia, along with the associated compliance obligations on Israeli corporations.

Stricter cartel enforcement in Europe: The European Commission expanded the scope of its enforcement measures beyond end products to also include suppliers of upstream active ingredients. This sends a clear warning to Israeli exporters: involvement in price coordination, even partial, may lead to heavy fines and compensation claims.

Personal sanctions and the banking system: The imposition of personal sanctions on ministers and right-wing figures in Israel created a conflict for banks. The Supervisor of Banks is demanding that banks avoid sweeping refusals to provide services, while banks are concerned about violating US sanctions with global applicability.

UNRWA’s immunity from tort claims: The United States’ classification of UNRWA as a “specialized agency” rather than an organ of the United Nations may lead to the revocation of UNRWA’s immunity from tort claims in Israeli and US courts.

Foreign direct investments – between national security and foreign policy: The mechanisms overseeing foreign investments in Israel are currently prioritizing foreign policy interests and the demands of the US administration, especially in relation to strategic infrastructure. The Jerusalem Light Rail Blue Line project is a case in point. The State disqualified the previously approved involvement of a Chinese company and reapproved it only by way of procurement through an American subsidiary, after the US withdrew its objections. This volatility requires investors to obtain advance legal protection against sudden shifts in the State’s position.

Conclusions and Looking Ahead to 2026: Practical Recommendations

This review of developments in 2025 shows that uncertainty has become the “new normal” in the international trade arena. Looking ahead to 2026, and given the normalization of volatility in domestic and global markets in recent years, Israeli companies should perform a comprehensive mapping of their import and export exposure under the new tariff regimes and re-examine their products’ customs classifications. In addition, companies should update their existing contracts to include mechanisms to contend with legislative amendments, force majeure, and cost pass-through. In the longer term, companies should consider relocating production lines or forming local partnerships in the US and Europe to mitigate tariff exposure and take advantage of regulatory exemptions. We also recommend that companies implement robust compliance programs for competition law and sanctions, in order to minimize exposure to civil lawsuits and heavy administrative fines.

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Prof. Amichai Cohen is a special counsel on international law at our firm.

Our legal services to clients in the field of international law address aspects of international trade law, national security law, Israeli constitutional law, international criminal law, and the application of international law in Israeli law.