Leo Leiderman: US tariffs will not directly have an effect on Israel

As one in every of Israel’s most senior and veteran macroeconomic commentators, Leo Leiderman, Financial institution Hapoalim chief financial advisor and professor of economics at Tel Aviv College, has seen nearly each kind of doable financial disaster. Now, he believes that Trump’s tariffs may very well be the black swan of 2025, and sees a risk that the president might again down from his aggressive steps. He additionally analyzes how the situation that might additionally have an effect on Israel?

Why are you afraid that President Trump’s tariff hike may very well be a black swan?

Leiderman: “As is understood, the idea of a black swan refers to an distinctive occasion that’s tough to foretell prematurely and that surprises the markets and normally causes sharp declines and a rise in financial dangers. The imposition of tariffs on Mexico, Canada and China might plunge the world right into a commerce warfare that might result in a slowdown in progress, injury to worldwide commerce, an increase in inflation and rates of interest, and a decline in residing requirements worldwide. In a commerce warfare, everybody loses.”

Might Trump again down?

“The whole lot is feasible. Measures to impose the tariffs aren’t anticipated to take impact till midnight on Monday, US time. Till then and within the coming days, there could also be talks between Trump and the leaders of a number of the above international locations, and a partial or full withdrawal from the brand new measures is feasible.”

The tariffs aren’t only a punishment

One of many major questions that now arises is what Trump is making an attempt to attain by imposing tariffs. “First, he desires to scale back the scale of the US present account deficit with every of the international locations in query,” explains Leiderman. “Second, he desires to extend the state’s income from taxes (together with tariffs) to finance cuts in different taxes. Third, he believes that the measures will shield home industries from low cost competing imports. Lastly, in his view, the imposition of tariffs is meant to “punish” Canada and Mexico for the dearth of robust insurance policies to curb unlawful immigration and drug trafficking.”

What’s your opinion of the pondering behind these goals?

“Idea, financial analysis, and expertise collected through the years point out that commerce wars have very unfavorable results on financial exercise, employment, and residing requirements. Over the previous three many years, the world has seen how the removing of some restrictions on worldwide commerce and the transfer in direction of free commerce have contributed to enhancing residing requirements and decreasing poverty in most areas of the world.”

What would be the results on Israel?

“Israel just isn’t on the heart of the creating commerce warfare, and that is an excellent factor. In actual fact, our worldwide commerce is unfold evenly between North America, Europe, Asia, and different areas. Assuming that Trump doesn’t impose new tariffs on us, a lot of the results can be oblique. If inflation and rates of interest within the US rise, and on the identical time there’s a slowdown in worldwide commerce and international exercise, then we are going to really feel the impression. It is going to be essential to proceed to unfold the geographical dangers of our exports and imports. It is rather good that Israel is someplace in the course of the present international turmoil.”

Revealed by Globes, Israel enterprise information – en.globes.co.il – on February 4, 2025.

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