Israel will face a 17% tariff on its exports to the United States as part of President Donald Trump’s sweeping global tariff plan, despite having eliminated all remaining duties on US imports just a day earlier in an attempt to avoid the penalty.

Israeli officials, who expected some action but were surprised by the magnitude of the tariff, said on Thursday they believe it will apply only to physical goods, potentially sparing the country’s crucial high-tech service sector that comprises more than half of Israel’s exports.

“We knew this was going to happen, but we are surprised about the scope of the tariff,” Finance Ministry Chief Economist Shmuel Abramzon said at a conference at Reichman University in Herzliya.

US trade data shows Israel exports approximately $22 billion in goods annually to the US, including diamonds, machinery, pharmaceuticals and electronic equipment.

Ron Tomer, president of the Manufacturers Association of Israel, called the situation “abandonment by a friend” during a local radio interview Thursday, adding: “We are all going to feel this in our pockets.”

Israeli economists believe Prime Minister Benjamin Netanyahu will seek to negotiate a reduction to the baseline 10% rate before it takes effect on April 5, with specific reciprocal tariffs set to follow on April 9.

The US administration calculated country-specific tariffs by taking each nation’s trade deficit as a benchmark and applying a formula. The bilateral trade deficit with Israel stood at approximately $7.4 billion last year.

Some market analysts see potential advantages if the European Union responds with reciprocal measures against the US, as Israel’s existing free trade agreement with the EU could position it favorably in the shifting trade landscape.

The Finance Ministry indicated Israel will continue negotiating with American counterparts. “We have a good channel with the US administration, and I believe that through dialogue and negotiations, we will succeed in making a change,” Abramzon said.

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