Trump's Influence on Israel's Economy and Decisions Assessed

Donald Trump has been identified as the individual with the most significant influence on Israel's economy for the second consecutive year, according to the publication Calcalist. Despite holding no official position or electoral mandate in Israel, Trump's decisions are reported to directly impact nearly all aspects of Israeli life, from its financial standing to its geopolitical security.

The article likens Trump's influence to a natural disaster, suggesting it is largely uncontrollable and difficult to prepare for. His impact on Israel's economy is multifaceted, primarily driven by geopolitics, followed by trade policy, monetary conditions, and financial market reactions. A single statement, news of tariffs, or a social media post from Trump can trigger immediate responses from the stock market, the shekel's exchange rate, and urgent meetings within the Israeli Ministry of Finance.

Geopolitically, Trump's decisions have had profound implications for Israel's security, which is intrinsically linked to its economy. Washington's stance on conflicts, such as potential actions against Iran, could lead to severe economic disruptions, including airport closures and mass mobilization. The report notes that in the past year, crucial decisions affecting Iran, the future of Gaza, Hamas disarmament, regional pressure tactics, and the expansion of the Abraham Accords have often originated from the White House rather than Jerusalem.

Improvements in the Middle East situation, influenced by Trump's policies, have historically reduced risk premiums, leading to cheaper government bonds, capital inflows, a stronger shekel, and lower borrowing costs, which in turn allowed the Bank of Israel to lower interest rates. Trump's trade policies, particularly tariffs on Israeli exports to the U.S. (which constitute about a third of Israel's goods exports), also play a role.

Other channels of influence include U.S. monetary policy, the dollar's exchange rate, and Trump's impact on governance systems, where independent institutions are sometimes viewed as obstacles. The article also references reports of growing disagreements between Trump and Prime Minister Benjamin Netanyahu, with sources indicating diminishing patience in the White House regarding differences on issues concerning Gaza, Lebanon, and Syria.