The European Union (EU) is on the verge of taking an unprecedented step in its relations with Israel, as the bloc considers suspending preferential tariffs granted under the EU-Israel Association Agreement. The European Commission formally proposed suspending certain trade-related provisions of the EU–Israel Association Agreement as a response to the war in Gaza and allegations that Israel is violating the human rights obligations of the agreement.
The conflict in Gaza, which intensified following the October 7, 2023 attacks by Hamas on Israel, has evolved into a protracted humanitarian crisis. Israel’s retaliatory campaign has led to widespread destruction, with reports from the UN and independent observers detailing the use of heavy artillery, airstrikes and blockades that have severely restricted access to food, water and medical supplies. Accusations of genocide by officials at the International Court of Justice (ICJ) have gained momentum following South Africa’s case against Israel in early 2024, alleging violations of the Genocide Convention.
The EU’s proposal aligns with these calls, emphasizing that trade benefits cannot be extended to a state engaged in such actions without consequences. The European Commission’s plan, unveiled on September 17, 2025, includes not only the suspension of trade preferences but also sanctions on “extremist ministers” in the Israeli government and violent settlers in the West Bank. This measure, which would affect a substantial portion of Israeli exports to Europe, comes against the backdrop of mounting accusations that Israel’s military campaign in Gaza amounts to genocide. At the same time, the decision follows a wave of recognitions of Palestinian statehood by European countries, most notably France and the UK, which joined a dozen other Western nations in acknowledging Palestine’s sovereignty.
This suspension would not constitute a comprehensive sanctions regime but would strike at the core of Israel’s longstanding advantage in the European market. Since 2000, the agreement has ensured that Israeli goods enjoy reduced or zero tariffs across much of Europe. Rolling back this preferential treatment would inflict an estimated annual loss of 227 million euros on the Israeli economy, primarily through higher duties on fruit, vegetables and rubber products. More importantly, it would show that Europe — long accused of mere rhetorical posturing without consequences — is now prepared to wield its economic leverage as an instrument of political pressure. This marks a turning point, given that the EU is Israel’s largest trading partner, with trade between the two totaling 42.6 billion euros last year, according to EU figures.
Reaching such a decision, however, requires a delicate balancing act. The European Council decides by qualified majority, demanding the support of at least 55% of member states representing 65% of the union’s population. This renders the positions of major countries such as Germany, Italy and France pivotal. While smaller states, including Portugal, Denmark and Greece, have pressed for consensus, resistance persists, particularly from Hungary and the Czech Republic, which remain firmly aligned with Israel.
Nowhere is the dilemma more acute than in Berlin. German Chancellor Friedrich Merz has promised to clarify his position before the EU summit in Copenhagen on October 1, 2025. Germany, carrying the historical burden of the Holocaust, has long been reluctant to endorse punitive measures against Israel. Yet Berlin now faces growing domestic and international pressure to recalibrate its stance. Public opinion in Germany has shifted dramatically considering the devastation in Gaza, and the coalition government is increasingly divided over whether its unwavering support for Israel remains tenable.
At the European level, another option could have been a full suspension of the entire agreement — not only the trade provisions — or a suspension of political dialogue, both of which would require unanimity among all member states, a challenging task given the existing divisions. This European debate on leveraging trade relations to pressure the Israeli government is unfolding against the backdrop of the Saudi-French initiative to recognize a Palestinian state. France and Saudi Arabia are increasingly positioning themselves as central actors in shaping a new international consensus on the Palestinian question.
Paris and Riyadh have jointly advanced a roadmap that seeks to revive the two-state solution through a coordinated approach. Their initiative — endorsed by 142 states in a UN General Assembly vote last week — rests on a triangular logic. First, Western countries, led by key European states, recognize Palestine as a sovereign state. Second, the declaration pledged broad international support for Gaza’s reconstruction, backing an Arab Organization of Islamic Cooperation recovery plan and announcing a forthcoming Gaza Reconstruction Conference to be held in Cairo. Third, the Palestinian Authority commits to internal reforms, including organizing elections scheduled for next year.
This Saudi-French initiative has given new momentum to what many had deemed a moribund process. France, traditionally one of the EU’s most assertive voices on Middle Eastern diplomacy, has long argued that recognition of Palestine should not be deferred indefinitely as the prospect of a two-state solution could become meaningless amid rampant Israeli settlement expansion and territorial fragmentation. Saudi Arabia, for its part, brings regional legitimacy and diplomatic weight, particularly as custodian of Islam’s two holiest sites and a leader in the Arab world. By jointly promoting a plan that marries Western recognition of Palestine with an Arab pledge for reconstruction of Gaza, Paris and Riyadh are seeking to break the stalemate that has defined the conflict for decades.
The debate within Europe must also be seen in the wider context of international law. Several UN rapporteurs, along with human rights organizations and states such as South Africa and Bolivia, have explicitly described Israel’s conduct in Gaza as genocidal. The ICJ has not yet reached a final judgment but has issued provisional measures ordering Israel to prevent actions that could amount to genocide. Although the EU itself has refrained from officially adopting this language, its growing willingness to use economic measures suggests that it takes these concerns seriously.
Strategically, the suspension of trade concessions would have far-reaching consequences. For Israel, the economic hit may be manageable, but the symbolic loss of preferential access to Europe would mark a significant diplomatic setback. For the EU, it would represent a rare moment of unity and assertiveness on the Israeli–Palestinian conflict, strengthening its credibility as a global actor committed to upholding international law. Failure, however, would highlight the union’s paralysis and expose the divisions that continue to undermine its foreign policy coherence. For the United States, Europe’s potential action is a double-edged sword. On one hand, it could widen the transatlantic gap if Washington remains protective of Israel. On the other, it might provide the White House with greater room to press Israel toward concessions without appearing to act alone. For Palestinians, recognition and economic pressure against Israel may breathe new life into the prospect of statehood, though the ultimate impact will depend on whether these moves translate into tangible change on the ground. Ultimately, the EU’s debate over suspending Israel’s preferential tariffs encapsulates the contradictions of its Middle East policy. For years, the union has been criticized for coupling lofty rhetoric with inaction. Now, propelled by the horrors of Gaza and emboldened by the Saudi-French initiative for Palestinian recognition, Europe is confronting the possibility of real consequences for Israel’s defiance of international norms.
