Israeli-Turkish trade, which has historically endured various diplomatic disputes, is now at risk due to the ongoing conflict in Gaza. This month, Turkey halted all bilateral trade with Israel until the conflict ends and humanitarian aid can enter Gaza unhindered. Israel contends that Turkey’s decision breaches World Trade Organization rules.
Israeli importers are urgently seeking alternative suppliers for critical goods, including cement, food, and automobiles. While this disruption may cause short-term shortages, economists believe it will not significantly impact Israel’s robust $500 billion economy.
“Turkey is a crucial trade partner, but Israel is not heavily dependent on it,” stated Shmuel Abramzon, Chief Economist at Israel’s Finance Ministry. He expects Israel’s economic growth in 2024 to surpass the current forecast of 1.6%, despite the current challenges. “Although alternative sources may be more expensive, we do not foresee substantial or lasting disruptions to the Israeli economy due to Turkey’s actions.”
In 2023, bilateral trade decreased nearly 23% to $6.2 billion, with Israeli imports making up around three-quarters of this figure. In response to Turkey’s suspension of trade, several Turkish exporters have attempted to reroute goods through third countries. However, exporters and importers in both nations report no success in these efforts.
Trade officials indicate that countries like Greece and Italy are prepared to step in and replace Turkish goods, with deals nearing completion. The primary concern remains finding new markets for over $1.5 billion worth of Israeli exports, mainly fuel, chemicals, and semiconductors.
“We shouldn’t depend on a country that is inconsistent in its trade policies,” remarked Roey Fisher, head of the Economy Ministry’s Foreign Trade Administration.
Expanded Analysis:
The trade suspension by Turkey comes at a critical time, affecting a range of sectors. While immediate shortages are anticipated, especially in construction materials like cement, the Israeli government is actively negotiating with other potential trade partners to mitigate these effects. Countries like Greece and Italy are ready to fill the gap, albeit potentially at higher costs.
From an investment perspective, this situation highlights the importance of diversifying trade partners. For businesses and investors, this is a reminder of the geopolitical risks inherent in international trade. However, Israel’s economy, with its diversified export base including high-tech sectors like semiconductors, is well-positioned to weather these disruptions.
Investors should watch for how quickly new trade routes and agreements can be established. The agility with which Israeli companies adapt to these changes will be crucial. Additionally, the impact on specific industries, such as construction and consumer goods, could offer insights into potential investment opportunities or risks.
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