The US tariff policy presented by Donald Trump on April 2 is more extreme than any of the most drastic scenarios recently discussed in the media. The rationale behind the White House’s plan was to create fair trade by imposing reciprocal tariffs—meaning the United States would impose tariffs equal to those levied on American products by each of its trade partners. However, the press conference revealed two major changes to the original plan. On the positive side, the American tariff rate will be only half of the tariff rate imposed on American goods. On the downside, the tariff rates listed for American goods were much higher than the original recognized tariff rates applied by those trade partners.
For example, according to the White House, American goods face a 33% tariff wall in Israel. Therefore, from now on, the tariff rate on Israeli goods entering the United States will be 17%. Dozens of countries will be subject to even higher tariff walls as a result of this new policy. The most prominent among them is, of course, China. At the beginning of Trump’s second term, a 20% tariff was already imposed on Chinese goods. Under the new plan, the total tariff rate on Chinese goods will rise to 54%. Trump’s plan does not differentiate between allies and adversaries. Therefore, even friendly trade partners like the European Union and Japan will also have to contend with a new reality of tariff walls at 20% or more.
For now, the tariffs apply only to goods entering the United States and not to services. In fact, the United States has maintained a services trade surplus for many years. However, its trade deficit in goods reached a new high of $1 trillion in 2024. The trade deficit, together with the budget deficit and the growing national debt, was a major theme emphasized by the Republicans during the election campaign. The White House hopes that the tariffs will strengthen the American economy through three key processes: First, companies will return to manufacture in the United States to avoid tariff barriers; second, tariff payments will increase the American treasury and help address the debt problem; third, revenue from tariffs will allow for tax cuts, leading to rising demand and economic prosperity. However, wishes aside, if things remain as presented on the White House lawn, it is likely that many countries will retaliate and raise their own tariff rates. This process could trigger a negative cycle resulting in price hikes, disruptions in global supply chains, and ultimately a global economic slowdown—or even a recession.
Although half of Israeli exports are in the service sector, which isn’t included in the trade war, Israel is still at risk of being affected by the new policy. Israel’s attempt to appease the Americans and reduce the few tariffs on American goods on Tuesday was unsuccessful. Therefore, Israel must now contend with a reality where its largest import partner imposes a higher tariff wall of 17% on its goods. Traditionally, more than a quarter of Israel’s total physical exports are destined for the United States. In 2024, Israeli goods exports to the United States (including diamonds) amounted to $17.3 billion. Additionally, since the usual response to tariffs is additional tariffs, Israeli goods could encounter new trade barriers elsewhere as well. There is no doubt that the likelihood of a global recession, which will also be felt significantly in Israel, has increased considerably since Trump’s announcement. A glimmer of hope came from US Secretary of the Treasury Scott Bessent, who asked that countries not respond to the tariffs, as this could worsen the situation. In other words, despite this tariff “bombshell,” there may still be room for negotiations to soften the blow.
The US tariff policy presented by Donald Trump on April 2 is more extreme than any of the most drastic scenarios recently discussed in the media. The rationale behind the White House’s plan was to create fair trade by imposing reciprocal tariffs—meaning the United States would impose tariffs equal to those levied on American products by each of its trade partners. However, the press conference revealed two major changes to the original plan. On the positive side, the American tariff rate will be only half of the tariff rate imposed on American goods. On the downside, the tariff rates listed for American goods were much higher than the original recognized tariff rates applied by those trade partners.
For example, according to the White House, American goods face a 33% tariff wall in Israel. Therefore, from now on, the tariff rate on Israeli goods entering the United States will be 17%. Dozens of countries will be subject to even higher tariff walls as a result of this new policy. The most prominent among them is, of course, China. At the beginning of Trump’s second term, a 20% tariff was already imposed on Chinese goods. Under the new plan, the total tariff rate on Chinese goods will rise to 54%. Trump’s plan does not differentiate between allies and adversaries. Therefore, even friendly trade partners like the European Union and Japan will also have to contend with a new reality of tariff walls at 20% or more.
For now, the tariffs apply only to goods entering the United States and not to services. In fact, the United States has maintained a services trade surplus for many years. However, its trade deficit in goods reached a new high of $1 trillion in 2024. The trade deficit, together with the budget deficit and the growing national debt, was a major theme emphasized by the Republicans during the election campaign. The White House hopes that the tariffs will strengthen the American economy through three key processes: First, companies will return to manufacture in the United States to avoid tariff barriers; second, tariff payments will increase the American treasury and help address the debt problem; third, revenue from tariffs will allow for tax cuts, leading to rising demand and economic prosperity. However, wishes aside, if things remain as presented on the White House lawn, it is likely that many countries will retaliate and raise their own tariff rates. This process could trigger a negative cycle resulting in price hikes, disruptions in global supply chains, and ultimately a global economic slowdown—or even a recession.
Although half of Israeli exports are in the service sector, which isn’t included in the trade war, Israel is still at risk of being affected by the new policy. Israel’s attempt to appease the Americans and reduce the few tariffs on American goods on Tuesday was unsuccessful. Therefore, Israel must now contend with a reality where its largest import partner imposes a higher tariff wall of 17% on its goods. Traditionally, more than a quarter of Israel’s total physical exports are destined for the United States. In 2024, Israeli goods exports to the United States (including diamonds) amounted to $17.3 billion. Additionally, since the usual response to tariffs is additional tariffs, Israeli goods could encounter new trade barriers elsewhere as well. There is no doubt that the likelihood of a global recession, which will also be felt significantly in Israel, has increased considerably since Trump’s announcement. A glimmer of hope came from US Secretary of the Treasury Scott Bessent, who asked that countries not respond to the tariffs, as this could worsen the situation. In other words, despite this tariff “bombshell,” there may still be room for negotiations to soften the blow.