US President Donald Trump is causing increasing fears of a trade war thanks to the continued tensions with China. Corporate America has already started to warn that price hikes are on the way, and automaker Ford states that they’ve lost $1 billion in profits due to Trump’s tariffs.
China has fought back, and the country has announced that tariffs will be cut on 1,500 goods on November 1. The move will decrease the pressure on consumers and help build stronger relationships with non-US suppliers.
But what will this mean for Israel?
Israel is able to avoid the 25% tariffs on steel and 10% tariffs on aluminum due to Israel being an importer of the materials. This is good news for Israel because, as we’re seeing, prices of everything from automobiles to infrastructure projects will be higher in the US.
The biggest concern is that other countries will start to respond to the tariffs.
China, for example, is working to build relationships with non-US suppliers, but let’s assume stipulations are put in place and these other countries have to impose tariffs on the United States. The global supply chain may start to be squeezed, and when the global supply chain is squeezed, who will have to pay higher prices? Israelis.
Everything from sewer systems to housing, autos, raw materials and supplies for our thriving startup sector may rise.
Import prices will increase eventually, causing Israelis to pay higher prices because Israel imports consumer goods, raw materials, and other goods.
Of course, it’s the response of all of the world’s leaders that will dictate what happens. Right now, it seems China and the US are the two main economies going head-to-head. But there’s also the chance that other countries, including the large economy that is the European Union, which may impose tariffs and duties on goods.
Israeli companies are already taking measures to reduce the impact of a trade war, opening subsidiaries in the United States to take advantage of better tax incentives and better trade conditions.
These benefits may be removed if trading benefits are ever removed from Israeli parent companies.
Israel has not been exempt from US tariffs, but Israel also exports just $25 million a year in steel and aluminum. These manufacturers, although on a smaller scale, will be hit by tariffs and may have to stop their operations as a result.
Slowly, prices down the supply chain will start to impact Israelis.
Israel is likely to look to repair relations with countries that it has strained relationships with. Turkey, for example, has faced higher tariffs on steel and aluminum, and the country has had to raise tariffs on US goods. The economic war with Turkey may provide an opportunity for Israel to restore relations and possibly form a new partnership in trade.
There are a lot of options for trade with Israel and other countries to continue to grow, especially when Israel’s exemption request was denied or ignored at the very least.
As tariffs start to squeeze supply chains and push prices higher, all economies will feel some impact.