Israel cancels customs duties on US goods ahead of Donald Trump's reciprocal tariff announcement | All you need to know

Israel has cancelled import duties and tariffs on all American goods, a day before US President Donald Trump is scheduled to announce reciprocal tariffs on trading partners. The order was issued under the directive of Israeli Prime Minister Benjamin Netanyahu by Finance Minister Bezalel Smotrich and Economy and Industry Minister Nir Barkat.

Israel-US trade relations

The US is Israel's largest trading partner and one of its closest allies. As of 2024, the export of goods to the US stood at USD 17.3 billion, while the export of services was at USD 16.7 billion.

What does the 1985 Free Trade Agreement say?

The Israeli government cited the 1985 Free Trade Agreement with the US, under which the majority (nearly 99 per cent) of goods imported from the US are already exempt from customs duties. Hence, the customs duties will be reduced to a limited range of products, starting from food and agricultural products from the US.

"The reduction in customs duties will, in effect, expand the US-Israel trade agreement and strengthen bilateral strategic relations," the Prime Minister's Office, Finance Ministry and Economy and Industry Ministry said in a joint statement.

Benjamin Netanyahu on eliminating import duties

According to PM Benjamin Netanyahu, cancelling customs duties will open up the market to completion and lower the cost of living.

“Cancelling the customs duties on American goods is an additional step in the policy that my government have led for a decade in opening up the market to competition, introducing variety to the economy and lowering the cost of living,” Benjamin Netanyahu.

“In addition to the economic advantages to the market and to the citizens of Israel, the current effort will allow us to further strengthen the alliance and ties between Israel and the US. We will continue to work to reduce barriers and customs, and bolster our special relationship with the US,” he added.

Donald Trump's reciprocal tariffs

The Israeli government's latest directive comes a day before US President Donald Trump is set to announce reciprocal tariffs on trading partners charging higher duties to rectify an"imbalance in trade." The US has an open economy, while its trading partners block US exports through tariffs. Hence, “Reciprocal trade will finally correct that imbalance," a White House statement quoted Trump.