Treasury sees Trump’s tariffs cutting Israel’s GDP growth

The Trump administration’s tariff plan would cut the Israeli economy’s GDP by billions of shekels during 2025 alone, according to preliminary estimates by the Ministry of Finance.

At this stage, amid the uncertainty that still surrounds the level of tariffs that would ultimately be imposed on Israeli goods, the annual damage to growth is estimated at less than 0.5% of GDP – under NIS 10 billion. This damage is directly attributable to the shock in global trade surrounding the tariff plan. Despite the negative impact, the expected rate of loss to GDP is moderate compared with forecasts for other countries, including the US itself.

The Ministry of Finance chief economist will publish Israel’s revised growth forecast towards the end of May or early June. The Ministry of Finance’s most recent forecast, published in October 2024, predicted 4.3% GDP growth rate for the Israeli economy in 2025. This comes after two years of faltering growth due to the war.

As reported by “Globes” last month, even before Trump’s controversial tariff plan was announced, the Ministry of Finance was already talking about revising Israel’s 2025 growth forecast downwards. The reason at the time was mainly technical. GDP for 2024 exceeded the earlier pessimistic forecasts, so there was supposedly less room for recovery in 2025.

This pressure to lower the growth forecast was reinforced this week, with the publication by the Central Bureau of Statistics, of the final GDP growth figure of 1% for 2024. This is a low rate in historical terms, but slightly higher than the previous estimate of 0.9% by the Central Bureau of Statistics.

Growth forecast to be revised downward

While the Ministry of Finance has long debated whether GDP performance in 2024 requires a reassessment and a more moderate assessment of growth in 2025, the issues of tariffs requires no discussions. The question is not whether to reduce the forecast but by how much.

The planned reduction in the Ministry of Finance’s forecast is not unexpected. The country issues two official macroeconomic forecasts – by the Ministry of Finance and the Bank of Israel, which already cut its growth forecast earlier this month, from 4% to 3.5%. The Ministry of Finance is more optimistic than the Bank of Israel and will probably reduce the forecast by a small amount from 4.3%.

Earlier this week, the International Monetary Fund (IMF) published a global review taking into account the tariff issue. The review did not focus on Israel but did contain a revised growth forecast for the country of 3.2%, an improvement on the IMF’s October 2024 forecast of 2.7% GDP growth in 2025, in contrast to the general trend in which the IMF cut the global growth forecast from 3.3% to 2.8%.

Published by Globes, Israel business news – en.globes.co.il – on April 24, 2025.