Trump’s Tariffs: A New Economic Headache for Israel and MENA?

As Donald Trump prepares to unleash a new wave of tariffs—potentially targeting China, Mexico, and even European allies—Israel and the broader Middle East-North Africa (MENA) region are bracing for impact. While the full details of his proposed trade barriers remain unclear, early signals suggest a repeat of his first-term protectionism, with global supply chains once again on edge.

Israel’s Preemptive Move: A Tactical Bet

In an unusual display of economic foresight, Israel scrapped all remaining tariffs on U.S. imports on April 1, 2025. This last-minute maneuver was designed to shield its $17.36 billion export market to the U.S. from any retaliatory measures Washington might impose. The decision, though politically astute, places Israeli farmers at a disadvantage, as domestic agriculture loses its last layer of tariff protection against cheaper American goods. The government will likely need to step in with subsidies or other relief measures to prevent backlash from local producers.

However, Israeli industries that rely on American supply chains—particularly tech and defense—stand to benefit from tariff-free access to U.S. goods. Moreover, Israel’s strategic decision positions it as a trade-friendly partner at a time when other nations may find themselves in Trump’s crosshairs.

The MENA Region: A Ticking Time Bomb?

For MENA economies, the effects of Trump’s tariffs will be more indirect but potentially just as disruptive.

• Gulf States: With minimal direct exposure to U.S. tariffs on steel and aluminum, GCC economies may initially benefit from a stronger dollar boosting oil revenues. However, if Trump’s trade war slows global economic growth, oil demand could take a hit—bad news for petro-states like Saudi Arabia and the UAE.
• Jordan & Lebanon: Jordan relies on textile and jewelry exports to the U.S. (25% of its total exports), making it vulnerable to any downturn in American consumer demand. Lebanon, drowning in dollar-denominated debt, faces even greater risks, as higher U.S. interest rates (a likely side effect of tariffs) will make debt servicing even more painful.
• Egypt & Tunisia: Rising U.S. interest rates due to inflationary pressures could trigger capital outflows from emerging markets, threatening Egypt’s fragile IMF-backed recovery. Tunisia, already struggling with economic stagnation, may see foreign investment dry up.

The U.S.-China Trade War: A MENA Disruption?

A renewed U.S.-China trade war under Trump could have knock-on effects for MENA’s trade corridors.

• The Gulf states, particularly the UAE, serve as key re-export hubs for Chinese goods moving into Africa and Europe. If Trump intensifies restrictions on Chinese exports, these trade hubs could take a hit.
• China is a major investor in MENA infrastructure projects under its Belt and Road Initiative. If trade tensions force Beijing to tighten its foreign investments, critical projects in Egypt, the Gulf, and North Africa could face delays or cancellations.

Israel’s Tech & Investment Positioning

While Israeli farmers may suffer from tariff removal, the country’s tech sector stands at an inflection point.

• If Trump escalates tariffs against China, Israeli startups—especially in AI, cybersecurity, and semiconductors—could become a more attractive alternative for U.S. firms looking to reduce their reliance on Chinese suppliers.
• However, if trade barriers disrupt global supply chains, Israeli companies that rely on U.S. components may struggle with higher input costs.

• The Israeli defense industry could also see challenges. While the U.S. remains a crucial ally, Trump’s “America First” procurement policies could lead to tighter restrictions on Israeli firms bidding for U.S. defense contracts.

The Iran Factor: More Sanctions, More Instability?

Trump’s first-term policies heavily targeted Iran with sanctions, and a second Trump administration could double down.

• Iran’s fragile economy, already suffering from inflation and currency devaluation, could face further collapse if Trump reimposes secondary sanctions on countries dealing with Tehran.

• Smuggling networks through Iraq and the UAE may expand as businesses seek ways to bypass U.S. restrictions.

• Regional tensions could rise if Iran responds with aggressive economic or military posturing, further destabilizing MENA trade.

Europe’s Response & MENA Trade Diversification

If Trump’s tariffs lead to a full-blown U.S.-EU trade war, MENA could see an economic realignment.

• Countries like Morocco, Egypt, and Turkey may deepen economic ties with Europe as a hedge against U.S. volatility.

• Europe, seeking alternatives to American imports, may increase energy imports from MENA—benefiting gas-exporting nations like Algeria and Egypt.

• However, if Europe also experiences economic turbulence from trade disputes, MENA’s reliance on European markets could become a liability rather than a safeguard.

The Bottom Line: A Strategic Realignment?

Israel’s tariff elimination is a clear defensive play, but MENA’s response remains uncertain. If Trump escalates a global trade conflict, Israel’s strategic realignment with the U.S. could pay off, while fragile MENA economies could be caught in the crossfire of rising debt costs, weaker trade flows, and oil price volatility.

For now, the region watches and waits. But if history is any guide, Trump’s tariff policies will once again leave winners and losers—Israel is trying to be the former, while much of MENA risks becoming the latter.