US Reciprocal Tariffs

On April 5, 2025, the United States imposed a 10% reciprocal tariff on all products being imported into the United States (with exceptions). In relation to countries with a large trade deficit with the United States – including the State of Israel – a special reciprocal tariff was imposed on imported products, which is calculated according to the magnitude of the trade deficit. The special reciprocal tariff was frozen for 90 days in order to allow the parties to reach agreements on ways to reduce the trade deficit.

According to media reports, Israel and the United States are holding proceedings with the aim of reducing the trade deficit in goods between the two countries. Israel’s trade deficit in goods with the United States is currently approximately USD 7 billion, and the Israeli prime minister has publicly committed to reducing this deficit.

The United States and Israel are discussing a series of proposals:

• Increasing Israeli government procurement from the United States (for example: defense procurement and vehicle procurement for the Israeli government). The main impact of adopting this proposal will be to compel imports from the United States (even though American products are sometimes more expensive or less suitable for Israel). This proposal could also have material adverse impacts on Israeli manufacturers in particular industries, such as in relation to defense procurement.

This proposal would not require legislative amendments.

• ŸEasing Israel’s regulatory restrictions on imports from the United States
  

• Even before President Trump’s announcement of the imposition of the special tariffs, Israel had already decided to completely eliminate all tariffs on products imported from the United States to Israel. These tariffs were mainly imposed on imported agricultural products.
• Including the United States in the “What’s Good for Europe is Good for Israel” reform (which automatically permits the marketing of a long list of products in Israel if their marketing is permitted in the European Union). This reform would primarily apply to various US pharmaceuticals and healthcare products, since it is generally assumed that the US FDA’s policy is more lenient than the European and Israeli authorities’ policies vis-a-vis numerous other products.
• Easing the reciprocal procurement obligations. Pursuant to Israel’s Mandatory Tenders Regulations (Mandatory Industrial Cooperation), foreign suppliers that win Israeli government tenders are contractually obligated to carry out reciprocal procurement; i.e. to purchase products manufactured in Israel at a particular percentage of the tender volume. In any case, the volume of reciprocal procurement with most countries is regulated under the World Trade Organization’s GPA (Government Procurement Agreement). Apparently, one of the proposals is to further reduce reciprocal procurement obligations.

Deviating from the Mandatory Tenders Regulations would require a legislative amendment. If the amendment solely favors the United States, it could trigger allegations of violations of international trade agreements to which Israel is a signatory within the framework of the World Trade Organization.

• Ÿ   Encouraging civil purchases of U.S. products

• Subsidizing oil purchases from the United States.
• Tax breaks for U.S. products – for example, lowering the purchase tax.

Some of these proposals would require legislative amendments. Giving preference to U.S. products could trigger allegations of violations of international trade agreements to which Israel is a signatory within the framework of the World Trade Organization