Israel's economy braces for major hit after Turkish ban

Turkiye’s recent decision to halt all its trade relations with Israel following the genocide in Gaza,  is poised to impact Israeli consumers with sudden price hikes in a short period of time, as Tel Aviv, taken by “complete surprise,” failed to devise alternative import measures, an Israeli media report has said.

Initially restricting exports to Israel for certain product categories on April 9, Ankara escalated to a complete halt of trade between the two nations by May 2, vowing to continue to impose the measures until the Israeli government allows the flow of humanitarian aid to the war-torn Gaza Strip.

Israeli news site Calcalist stated that the financial fallout following the Turkish ban will soon be felt in Israel, with the cessation of basic raw materials, leading to a rise in prices of essential goods and food, as well as an increase in housing prices.

The report noted that Turkiye’s decision to sever trade ties with Israel caught the country by surprise, as Israel had dismissed Ankara's earlier threats to ban goods as “empty” during the Gaza conflict.

Stating that securing alternative import sources requires time, the report pointed out that with the negotiation of new agreements, and even when achieved, the prices are likely to be significantly higher than those offered by Turkish suppliers.

“Israeli consumers, already grappling with a mounting cost of living, will bear the brunt of bridging these price disparities.”

The report from Calcalist underscored the construction and automotive industries as particularly vulnerable to the boycott, with major automakers relying on Türkiye to export popular car models to Israel.

Meanwhile, Adam Friedler, owner and CEO of Good Pharm, one of Israel’s major supermarket chains, characterized Ankara's decision as a "blow forcing the Israeli economy to seek much costlier alternatives."

In a bid to respond to Ankara’s move, the Israeli government prepared a four-staged plan.

This includes taking measures to reduce all economic ties between Türkiye, the Palestinian Authority and Gaza, without specifying the nature of these actions. Türkiye is the largest importer, with 18 percent of Palestine's imports.

Among these measures is the appeal to international economic authorities to impose sanctions on Türkiye for breaching trade agreements.

Additionally, the final phase of measures involves the provision of a financial aid package to sectors expected to be most affected, contingent upon swiftly identifying and reaching agreements with alternative suppliers for products originating from Türkiye.

Following Ankara’s announcement, Israeli Foreign Minister Israel Katz accused Ankara of blocking Israeli imports and exports from Turkish ports and “breaking agreements.”

Türkiye’s announcement has garnered significant attention in the international press, prompting a multitude of analyses.

The New York Times remarked that Ankara's decision deepens Israel's isolation, which began following the Gaza war.

According to data from the Turkish Statistical Institute, Türkiye exported goods worth $5.43 billion to Israel in 2023, a decrease from $7.03 billion in 2022 and $6.36 billion in 2021.

"We had a trade volume of $9.5 billion between us. Disregarding this trade volume, we have closed this door," Turkish President Recep Tayyip Erdoğan said on May 3.

Following Israel's statement regarding Palestinian-Turkish trade, the Palestinian Authority’s Economy Ministry has initiated contact and discussions with the Turkish ministry, with both ministers set to meet in Ankara soon.