When US President Donald Trump returned to office earlier this year, markets braced for impact. Within weeks, under the guise of “America First,” he has reignited the fuse of a familiar weapon: tariffs.
On Tuesday, the Trump administration updated the tariffs against China up to 104% on all imports, which by Thursday morning had risen to 125% – a move that was as politically provocative as it was economically seismic. The response from Beijing was swift but measured. By Thursday Beijing had introduced an 84% retaliatory levy against Washington.
“Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately,” Trump wrote on the Truth Social social media platform. “At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A., and other Countries, is no longer sustainable or acceptable.”
This followed the introduction of tariffs against almost all of the US’s trading partners over the past week – something that has thrown international markets into shock. Trump made a stunning turnabout on Wednesday when he paused for 90 days most of the hefty duties he had imposed on dozens of countries. However, the China tariffs not only remained in place but increased.
“For decades, our country has been looted, pillaged, raped and plundered by nations near and far, both friend and foe alike,” the president stated when he first announced the tariffs.
As the world scrambles to assess what this fresh round of economic brinkmanship means for supply chains and global trade flows, Israel, also the subject of US tariffs, finds itself navigating particularly complex terrain.
With the US, Israel shares a long and strong friendship, not just military and strategic ties, but a deep political alignment. With China, the relationship is more transactional – anchored in infrastructure, innovation, and labor. But in a world now defined by decoupling, de-risking, and economic nationalism, Israel may find that its tightrope walk between these giants has never been narrower.
The real cost of Trump's tariffs
According to the Chinese Embassy in Israel, the Trump tariffs represent more than an economic challenge. They strike at the very architecture of global trade. “[These tariffs] severely infringe upon the legitimate rights and interests of all countries,” the embassy shared with The Jerusalem Post on Wednesday. “They violate WTO rules, undermine the rules-based multilateral trading system, and disrupt the global economic order.”
For China, Trump’s tariff blitz is not just an attack on Chinese exports, but a warning shot to the more than 100 countries that list China as their top trading partner.
Trade between Israel and China is not just strong but also strategic. While the United States remains Israel’s key security partner, China is its largest trading partner in Asia, with total bilateral trade estimated at $17 billion annually. China has invested heavily in Israeli infrastructure, winning major contracts like the construction of the Tel Aviv Light Rail, the Carmel Tunnels, and, most notably, the management of Haifa’s new port.
Beyond infrastructure, Chinese companies are deeply embedded in Israel’s construction sector, employing an estimated 20,000 Chinese workers, many of them operating under special government agreements. And then there’s innovation: China is a keen buyer of Israeli tech, water purification systems, and agricultural technology.“We value our cooperation with Israel greatly,” the Chinese Embassy emphasized. “But we must not allow third-party factors to disrupt what is a mutually beneficial relationship.”
The “third-party factor,” of course, is the United States.
The Trump administration’s view is clear: “America First.” The president has consistently championed a mercantile approach, arguing that the US is being taken advantage of by unfair trade partners, particularly China. His strategy is to weaponize tariffs, force new trade terms, and reshape global supply chains to tilt in America’s favor.
But in doing so, Trump may be unintentionally driving US allies – Israel among them – closer to Beijing.
Already, Israel has faced trade friction with the US. In a move that left Israeli officials and business leaders both stunned and disheartened, Trump announced last week the imposition of a 17% tariff on Israeli goods entering the United States.
The United States and Israel have maintained a free trade agreement (FTA) since 1985, which is believed to cover approximately 99% of all trade between the two nations. The remaining 1% – largely related to specific American agricultural products – was subject to tariffs until just recently. Just hours before Trump’s introduction of tariffs, Israel removed its last remaining import duties on US goods.
According to US government data, American exports to Israel reached $14.8b. in 2024, while imports from Israel totaled $22.2b., leaving a $7.4b. trade surplus in Israel’s favor.
With Israel having now scrapped its last formal tariffs on US products, attention is turning to non-tariff trade barriers. Prime Minister Benjamin Netanyahu has pledged to address these as well, as part of a broader commitment to narrow the US trade deficit with Israel.
FOR THE last few years, Israel and China have been negotiating an FTA. Talks have been steady, albeit slow. According to Chinese diplomats, the agreement could eliminate tariffs on over 90% of traded goods between the two nations, boosting bilateral commerce in tech, services, agriculture, and green energy.
But now, amid the global economic uncertainty triggered by the Trump tariffs, that agreement hangs in limbo.“There is a strategic logic to concluding the FTA now,” said one Chinese diplomat in Jerusalem. “But we also understand that Israel must wait and see how the situation evolves with Washington.”
By signing an FTA with China now, Israel risks triggering economic retaliation – or at least diplomatic disapproval – from the United States. But by stalling too long, it may miss a key window to deepen ties with a country that views economic partnership as a core part of its geopolitical influence.
China has also been glancing at the Middle East for another reason – the Houthi attacks on international shipping in the Red Sea, linked to the ongoing Israel-Hamas War, have added further stress to already fragile global supply lines. China, which relies heavily on maritime trade through the Bab al-Mandab Strait and Suez Canal, has been directly affected.
“We view the attacks as a dangerous spillover from the Gaza war,” Beijing’s representatives in Israel told the Post on Wednesday. “These threats harm everyone.”
If there’s one thing that global business leaders agree on, it’s that the world is witnessing the unraveling of the old economic order. The postwar consensus of free trade, underpinned by multilateralism, is being replaced by something messier, more fragmented.
“De-risking,” “decoupling,” and “economic sovereignty” are the buzzwords of 2025. Trump’s tariffs are only the latest and loudest manifestation of a broader trend toward economic nationalism. China’s view is that the US is not merely using tariffs as leverage – it is weaponizing global interdependence.
“There are no winners in tariff wars,” China’s embassy reiterated.
With a trade surplus of $295b. with the US (as of 2024), China has much to lose from a full-scale economic divorce. But Beijing has been quietly preparing for this moment – diversifying supply chains, strengthening intra-Asian trade, and deepening ties with Africa, Latin America, and Europe.
China’s renewed interactions with South Korea and Japan, two of Asia’s most developed economies, signal a shift toward regional consolidation. These alliances, along with initiatives like the Regional Comprehensive Economic Partnership, aim to create an Asia-first economic sphere less vulnerable to Western pressure.
And while Trump touts self-reliance, China is betting on “big crisis = big opportunity,” using this trade war as a catalyst for even deeper global engagement on its own terms.
Israeli businesses are dependent on foreign markets, and globalization is deeply ingrained in the economic DNA of the country. Tech exports, agricultural innovation, and niche manufacturing all depend on open trade routes and diversified demand.
At the same time, there are imbalances: Israel, a country of 10 million, trades with China, home to 1.4 billion people and a middle class of 300 million. There’s no illusion that the relationship is equal – but it is an essential market for the Israeli economy.
The Israel-China-US triangle is a microcosm of the larger global transition under way. As old certainties fall away, countries like Israel will redefine their economic international relationships. Will Israel embrace a multipolar trade strategy, leveraging both Eastern and Western ties? Or will it be compelled to pick a side in a battle not of its choosing?
One thing is clear: economic realignment is not a hypothetical scenario. It’s already happening.
“The world must embrace fairness and reject hegemonism,” China has stated. “Development is the right of all nations, not a privilege of the few.”
Whether that vision will prevail depends on what happens in Washington and Beijing.
