The economic relationship between the United States and Israel is both historic and strategic, built on shared values, mutual interests, and robust trade. At its core lies the United States-Israel Free Trade Agreement (FTA), the first such agreement ever signed by the United States. Since its implementation in 1985, this landmark deal has significantly deepened bilateral economic ties and fostered innovation, investment, and industrial collaboration.
The First U.S. Free Trade Agreement
The 1985 FTA marked a pivotal moment in U.S. trade policy. It set a precedent for the many trade agreements that followed and solidified Israel’s role as a key economic partner. At the time of signing, bilateral trade between the two countries was modest, but the removal of tariffs and trade barriers unleashed an era of rapid growth. By 2016, U.S.-Israel trade had increased ten-fold, reaching $49 billion.
This agreement not only opened new markets but also promoted regulatory transparency and laid the groundwork for deeper economic cooperation. By 2019, U.S. exports to Israel had risen by 538% since the FTA’s inception. More recently, in 2024, total goods trade between the two nations stood at $37 billion, with U.S. exports valued at $14.8 billion and imports from Israel totaling $22.2 billion. Despite the growing trade, the U.S. recorded a goods trade deficit with Israel of $7.4 billion in 2024, up 8.6% from the previous year.
Investment and Innovation
Israeli investment in the United States has mirrored the upward trajectory of trade. Israeli companies now invest approximately $24 billion in the U.S., nearly triple the amount from a decade ago. This includes major contributions in technology, defense, and infrastructure sectors. A prime example is the Carlsbad, California desalination plant—designed by IDE Technologies, an Israeli firm—which is one of the largest and most advanced facilities of its kind in the U.S., showcasing Israel’s global leadership in water technology.
Cooperation extends far beyond trade figures. In recent years, high-level bilateral agreements have been signed across a spectrum of sectors. These include civil aviation, public health, energy (including renewables), space exploration, and transportation innovation—particularly in autonomous vehicle development. Water management is another key focus, with Israeli expertise now aiding drought-prone U.S. states in addressing their water crises through cutting-edge desalination and conservation technologies.
Strategic Military and Foreign Aid Relationship
While economic ties are vital, the U.S.-Israel relationship is equally defined by security cooperation. Israel has been the largest cumulative recipient of U.S. foreign aid since World War II, receiving approximately $310 billion (adjusted for inflation) in military and economic assistance. Today, nearly all U.S. aid to Israel is military in nature, supporting one of the most technologically advanced armed forces in the Middle East.
Under a 10-year memorandum of understanding signed in 2016, the U.S. committed to providing Israel with $3.8 billion annually through 2028. This funding underscores the strategic alliance and the shared geopolitical interests of both nations in a volatile region. Israel is also a major purchaser of U.S. defense equipment, further reinforcing the two nations’ industrial and military interdependence.
Looking Ahead
While trade imbalances remain a challenge, the broader picture is one of deep, strategic collaboration. Whether through joint space missions, autonomous vehicle research, or water innovation, the United States and Israel continue to build a dynamic partnership that promises to grow in complexity and importance in the years ahead.
