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Israeli officials to formulate response

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Exact impact of US tariffs still unclear

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Finance ministry official sees diamonds, machinery being hit

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High-tech sector unlikely to be affected, official says

(Recasts with official saying which goods likely to be affected, analyst on impact)

By Steven Scheer

JERUSALEM, April 3 (Reuters) - Donald Trump's latest tariff announcement could impact Israel's exports of machinery and medical equipment, an Israeli finance ministry official said on Thursday, as the government sought to minimise the impact of the threatened U.S. measures.

As part of a sweeping new tariff policy, unspecified Israeli goods exports to the United States face a 17% tariff. The U.S. is Israel's closest ally and largest single trading partner.

Israeli Finance Minister Bezalel Smotrich said he would discuss with officials, after speaking with economic leaders, how to "analyse opportunities and risks and formulate courses of action, both in relation to President Trump and his team and regarding the necessary steps to strengthen Israel's industry".

Israel had already moved to cancel its remaining tariffs on U.S. imports on Tuesday.

Israel and the U.S. signed a free trade agreement 40 years ago and around 98% of goods from the U.S. are now tax-free. The finance ministry noted that tariff collection from U.S. imports - mainly in the agricultural sector - stands at about 42 million shekels ($11.3 million) a year.

A Finance Ministry official said the announced 17% tariff on certain Israeli goods was lower than those on many other countries.

Speaking on condition of anonymity due to the sensitivity of the issue, he said it was derived from a calculation based on Israel's $8 billion trade surplus with the U.S., in which Israeli goods exports to the U.S. were some $17 billion in 2024.

The official noted that while the issue was still unclear, tariffs likely do not include services and that about half of Israeli exports are high-tech services. High-tech comprises 20% of Israel's GDP.

But it will likely impact diamonds, machinery, electrical and medical equipment, the official said, urging the Prime Minister and Finance Minister to negotiate with Trump officials to try and reduce the tariff to no more than 10%.

Citi economist Michel Nies estimated a potential hit to Israel's economy of as much as $3 billion, or 0.6% of GDP.

Ron Tomer, president of Israel's Manufacturers' Association, said the tariffs could harm Israel's economic stability, deter foreign investments, weaken the competitiveness of Israeli companies in the U.S. market, and set back trade and investment relations between the countries.

"We hope and believe that the decision will be short-lived, and we will work with the Ministries of Finance and Economy to reverse it," Tomer said.

The association said it would work on formulating strategies to cope with the new situation and seek new export markets, and called for continued intensive negotiations between Israel and the U.S. to bring about a change in the decision or at least reduce its scope.

($1 = 3.7106 shekels) (Reporting by Steven Scheer. Editing by Alison Williams, Mark Potter, Philippa Fletcher)