Unleashing an Economic Tool: Tariffs and Israeli Trade Practices
By Gabriela Saba
July 7, 2026. After weeks of research, calls with diamond experts, and deep dives into Israeli labor laws, I arrived at the Office of the U.S. Trade Representative thirty minutes early to our scheduled hearing time. The security line already spilled out the building doors and wrapped down the street. Around us were embassy staff, labor advocates, industry representatives, and trade lawyers, waiting to argue why their country or industry merited an exception - or deserved a penalty through - the Trade Commission’s ongoing action.
We settled into the back of the hearing room, preparing for the long haul ahead. Six panels of witnesses presented arguments, from governments seeking country-level exemptions from the proposed tariffs to industry representatives - pig iron (which I did have to Google), cement, quartz slabs - arguing that they met minimum labor standards. After almost seven hours of testimony, the audience was steadily withering away. Josh and I took a break to refuel on food and a World Cup game; finally, it was our turn. “Panel 7, A New Policy."
As soon as my colleague Josh began with, “A New Policy fully supports your core findings that Israel, in particular, has failed to effectively impose and enforce a prohibition on the importation of goods produced with forced labor,” it was like a jolt of energy had been sent through the room. I watched the people around me put down their phones and start to mutter to each other.
Until then, the hearing had been largely technical. Now, Israel was on the agenda.
What is Section 301?
Section 301 is a provision in the U.S. Trade Act of 1974 that empowers the government to investigate and retaliate against foreign trade practices that are unjustifiable, unreasonable, or discriminatory and burden U.S. commerce. It is the primary tool used by the U.S. to impose unilateral remedies, most notably tariffs.
What is the Section 301 Forced Labor Investigation?
In March 2026, the U.S. Trade Representative (USTR) launched Section 301 investigations into 60 economies, including Israel, to determine whether they had failed to impose or effectively enforce a prohibition on the importation of goods produced with forced labor. The investigation concluded that Israel's lack of a forced labor import prohibition and enforcement regime constitutes an unreasonable trade practice and burdens or restricts U.S. commerce. The USTR has proposed imposing a 12.5% additional tariff on most Israeli imports unless reforms are implemented.
What is A New Policy advocating for?
In its testimony, A New Policy identifies three sectors that pose particularly high risks of introducing forced-labor goods into the U.S. market: diamonds, semiconductors, and textiles. However, the problem extends beyond any single industry. Exploitative labor practices within Israel’s domestic labor market further demonstrate broader weaknesses in labor protections, enforcement and regulatory oversight. A New Policy argues that this reflects a systemic pattern of inadequate policy and enforcement, making the proposed 12.5 percent tariff insufficient to change Israel’s behavior or protect U.S. supply chains. As a result, A New Policy requests the strongest remedies available under the statute, including tariffs on all Israeli-origin commercial goods and rejecting country- or sector-specific exemptions that could create loopholes for products linked to forced labor.
Forced-Labor Risks in Israeli Imports
Although Israel criminalizes slavery, forced labor, and human trafficking under domestic law, it does not maintain a comprehensive legal and regulatory regime comparable to that of the United States to prevent the importation of goods produced with forced labor. Israel has no publicly available customs mechanism for detaining or excluding forced-labor goods, no statutory import prohibition targeting such products, and no mandatory supply chain due diligence or traceability requirements across high-risk industries. As a result, imported raw materials and commodities originating in jurisdictions with documented risks of forced labor can enter Israeli supply chains with limited transparency, regulatory safeguards, and oversight.
These gaps create risks across multiple sectors of the Israeli economy, including diamonds, semiconductors, textiles, and other industries that depend on globally sourced raw materials or migrant labor. Because many products undergo substantial processing before export, the origin of high-risk inputs becomes difficult, if not impossible, to trace, increasing the probability that goods containing forced-labor inputs enter international markets, including the United States.
Diamonds
Israel is one of the world's largest diamond trading and polishing hubs, centered around the Israel Diamond Exchange in Ramat Gan. Despite playing a major role in refining and exporting diamonds, Israel has no domestic diamond mines and relies entirely on imported rough diamonds.
Imported rough diamonds are routinely sorted, aggregated, and mixed at international trading hubs before they reach cutting and polishing centers. Once they are mixed and processed, customs authorities generally cannot determine the original mine for an individual stone. These imports come from other trading centers, such as Dubai and Antwerp, as well as directly from diamond-producing countries in Africa and elsewhere. Several of these source countries, including the Democratic Republic of the Congo (DRC), Angola, Sierra Leone, and Guinea, have been identified by the U.S. Department of Labor as presenting a high risk of forced labor or child labor in diamond mining.
A key challenge is the limited traceability and opacity of diamond supply chains. After diamonds are cut, polished, and traded, it becomes exceedingly difficult to determine the mine of origin for each individual stone. Because Israel lacks legislation and oversight specifically requiring companies to trace or verify the labor conditions under which imported diamonds were mined, rough diamonds originating from high-risk sources can enter the Israeli supply chain. These diamonds may then enter the U.S. supply chain because, under U.S. law, rough diamonds that are cut and polished in Israel may be treated as products of Israel. As a result, the U.S.’ ability to prevent the importation of diamonds produced with forced labor is effectively reliant on Israel’s supply-chain controls and their enforcement.
Textiles and Semiconductors
Israel's semiconductor industry depends on globally integrated supply chains for critical minerals and semiconductor-grade materials, including cobalt, tantalum, tin, tungsten, and polysilicon. Many of these inputs are sourced from jurisdictions where forced labor has been extensively documented, including the Democratic Republic of the Congo, China’s Xinjiang Province, and Rwanda. Without supply chain due diligence and traceability requirements, these high-risk materials can be incorporated into downstream products with little ability to trace or verify their origin.
Unlike some of the world's leading semiconductor manufacturing economies, which have developed increasingly sophisticated supplier due diligence systems in response to customer, regulatory, and export market expectations, Israel lacks a comparable domestic framework requiring companies to trace the origin of upstream raw materials or assess forced labor risks. While Israeli semiconductor manufacturers maintain extensive production traceability for quality assurance purposes, there is no equivalent legal obligation to verify the provenance or labor conditions of the imported upstream inputs. This creates a regulatory gap that is particularly significant in mineral-intensive sectors with elevated forced labor risks.
Similar concerns exist in the textile and apparel sector. China is Israel’s largest source of textile imports, including cotton and other inputs that may be linked to Xinjiang. Under the Uyghur Forced Labor Prevention Act (UFLPA), goods mined, produced, or manufactured wholly or in part in Xinjiang are presumed to be made with forced labor and are prohibited from entering the United States. U.S. Customs has already detained thousands of textile shipments under the Uyghur Forced Labor Prevention Act due to concerns of forced labor in global cotton supply chains. The U.S. is also Israel’s top destination for textile exports, with the U.S. receiving roughly $295 million in Israeli textile products in 2024 alone.
Because Israel lacks comprehensive supply chain traceability requirements for these imports, high-risk inputs may be incorporated into finished products exported to the United States. This creates an opaque supply chain, in which products containing forced-labor inputs cannot be readily distinguished from those produced through verified and compliant sourcing practices.
Systems of forced labor in Israel
International organizations and the U.S. government have continued to document labor exploitation involving migrant workers and Palestinian workers employed in Israel and illegal Israeli settlements, highlighting broader concerns about labor protections and supply chain transparency. While Israeli law criminalizes human trafficking and forced labor through the 2006 Anti-Trafficking Law and the 2014 Protocol to the ILO Forced Labour Convention, ratified in 2018, the country has not adopted a comprehensive framework to identify, prevent, or remediate forced labor throughout its economy or supply chains. As a result, international organizations and the U.S. government have repeatedly identified forced labor risks affecting workers both within Israel and throughout supply chains connected to its economy.
These concerns extend well beyond imported diamonds, semiconductors, or textiles. The U.S. State Department's 2024 Trafficking in Persons report has repeatedly documented indicators of forced labor affecting migrant workers in Israel’s agricultural sector, particularly among Thai laborers. Reported abuses include passport confiscation, excessive working hours, restrictions on changing employers, poor living conditions, and other practices recognized by the International Labour Organization as indicators of forced labor. Similar findings have been documented by human rights organizations, including reports of hazardous working conditions, retaliation against workers who complain, and abusive recruitment practices that leave migrant workers dependent on their employers.
International organizations have also raised longstanding concerns about labor conditions affecting Palestinian workers employed in Israel and illegal Israeli settlements. The permit system governing access to employment, combined with the role of labor brokers who charge recruitment fees, has been criticized by the International Trade Union Confederation and the ILO for creating relationships of dependency and exploitation. Human Rights Watch has further documented hazardous child labor by Palestinian children as young as 11 years old working in Israeli agricultural settlements.
These recurring findings across multiple sectors suggest that forced labor concerns are not isolated incidents tied to particular products or industries, but reflect broader weaknesses in Israel's approach to preventing labor exploitation and conducting human rights due diligence across its economy.
