J.P. Morgan Report: Turkey's Trade Freeze with Israel May Have Limited Impact
Posted on May 4, 2024 by Ifi Reporter
In a special report circulated to its clients, J.P. Morgan, the world's largest investment bank, highlighted Turkey's recent decision to freeze trade with Israel "until a permanent ceasefire in Gaza" and its potential impact on Israeli trade. The report underscores the significance of Turkey's share in Israeli trade, with 2.5% in exports and 5.8% in imports last year, suggesting that the repercussions of the Turkish boycott could be notable.
However, J.P. Morgan also identified several factors that could mitigate the severity of the situation. Firstly, Turkey had previously announced bans on trade in 54 individual goods, easing the adjustment process for trade flows. Additionally, the report notes that imports from Turkey primarily consist of lower value-added products such as steel and cement, which could be substituted from alternative sources, albeit potentially at a higher cost.
Moreover, the bank highlights Israel's shift towards service exports over the past two decades, which now constitute more than half of total exports. This makes it more challenging to impose a boycott on Israeli services compared to goods. Notably, Israel's key export destinations for business services are the USA and Europe, suggesting that trade restrictions from these geopolitical partners would have a more substantial economic impact.
In conclusion, J.P. Morgan suggests that while the Turkish trade freeze may marginally increase price pressures in the goods sector in the short term, its overall impact may be limited, especially amidst recent disruptions in maritime trade in the Red Sea.
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