President Donald Trump has called for an “even closer trading relationship” with Israel, and to “narrow that trade deficit”, during his first overseas trip Reuters reports. It was not made clear how a “closer” trading relationship can be achieved given the two countries already have a free trade agreement. One route may be an update to the deal as part of the U.S. “performance review” of all its trade deals, as outlined in Panjiva research of May 2. That isn’t due to be completed until October 26. For the Trump administration there is also the policy objective of cutting healthcare costs costs, a sector which makes up 30.7% of Israeli exports (excluding diamonds) to the U.S., Panjiva analysis shows.

Chart segments top 200 U.S. exports to Israel and vice versa by HS code, shown as a percentage of total exports excluding diamonds     Source: Panjiva

With regards to the trade balance, this has already been narrowing. The U.S. trade deficit with Israel (ie goods exported less imports) is 12.4% below its 2015 peak on a 12 month trailing total basis. That followed a period of declining imports during 2016, though in the past quarter this is beginning to reverse.

Chart compares U.S. exports to Israel to its imports from Israel on a quarterly year-over-year basis. Balance represents Israeli trade surplus with the U.S.     Source: Panjiva