Mahmoud Yaqoub, a 49-year-old Palestinian farmer, is hemmed in on two sides by an Israeli settlement. Standing on his roof, he points up the hill at olive trees he says are his. But he cannot reach them as a metal fence has been erected around Efrat, confiscating part of his family’s land.

Yaqoub’s sheep are confined to a metal shack next to his house. He says the Israeli army banned him from shepherding them on his land as it is considered too close to the settlement.

Until this week, the US – in line with overwhelming global consensus – had considered settlements such as Efrat to be illegal under international law. On Monday, the Trump administration announced that it believed this was no longer the case.

“There is nothing left of our land. With this decision the settlement will expand,” Yaqoub says, adding that he worries his home will taken next, as other Palestinians’ homes have been. “I don’t understand this blind support.”

On the other side of the metal fence, Efrat looks like a Californian suburb. Bicycle paths snake through neighbourhoods; roundabouts are filled with colourful flowers; houses are mostly uniform, with red tiles on the roofs; and children run around in playgrounds.

More than 12,000 people live here. There are signs of occupation but you cannot immediately see them – a watchtower in the distance, pistols in the backs of trousers.

International law forbids states from moving their civilians on to occupied land at the expense of local populations. But as far as Efrat’s residents and much of the Israeli public is concerned, this is a legitimate Israeli town, not an unlawful outpost built on Palestinian land.

Oded Revivi, the mayor of Efrat, regards the US announcement as part of a decades-long move towards backing the settler argument that they should hold the land indefinitely. “There is a growing change in attitudes,” he says. “And the current administration is certainly spelling it out.”

He believes Donald Trump has something to gain from his support for the settler movement: rallying pro-Israel voters before the 2020 presidential election.

Speaking at his offices in Efrat, the mayor has come straight from a meeting with Benjamin Netanyahu, who had celebrated the news with settler leaders on Tuesday. “I think he understands that something came wrapped up as an extremely big present on his table,” Revivi says of the Israeli prime minister.

As president, Trump has repeatedly made moves welcomed by Israeli hardline nationalists and settlers, at the expense of Palestinians who want to build a future state in the occupied territories. He has recognised the contested city of Jerusalem as Israel’s capital, slashed humanitarian aid to Palestinian refugees and closed the Palestinian diplomatic offices in Washington.

Netanyahu has sought to take credit for these decisions, playing up his relationship with Trump to appeal to rightwing voters. In September, days before national elections, Netanyahu said he intended to annex Jewish settlements and declare them part of Israel.

Settlers have been sceptical, as this would lead to a diplomatic fallout that Netanyahu may not want to provoke, but they see the latest US policy shift as helping to push their prime minister in that direction.

“He understands what happened yesterday has significance,” says Revivi, who is also a member of the Yesha Council, the main Israeli umbrella settler organisation. “Now is the time to take action.”

The kink in that plan is the political paralysis that has engulfed Israel after two elections this year. Netanyahu is battling for his political survival while his rival Benny Gantz tries to assemble a coalition government. The deadline to do so is Wednesday night and it could end Netanyahu’s 13 years in office or lead to another election.

Gantz presents himself as a centrist but equally panders to hardliners and has also pledged to take permanent control of at least large chunks of West Bank. “It’s hard to tell what is the difference between Gantz and Netanyahu,” Revivi says.

In practice, the government already treats settlements in many ways as an extension of its territory. Unlike Palestinians, Israelis living there have full citizenship rights and can travel freely between the two territories.

Many of Efrat’s residents commute daily to Jerusalem, and it is fully connected by public transport to Israel. Around 30% of the people who live there are foreign-born Jews, and Revivi says a person could probably get by there without any Hebrew. Major Israeli burger and deli chains have opened branches and there is even a travel shop selling flights for European getaways.

One 16-year-old resident, eating a panini at a salad bar in Efrat, says he enjoys the lifestyle, with a gym and a basketball court. Born in New York, he moved to Efrat as a young child. He says he “doesn’t think much about politics” and has not heard about the US announcement.

Outside Efrat’s gates, 2.5 million Palestinians live under military rule and are less nonchalant. “Why does [the US] want to please the Israeli government at our expense,” asks Jamal Saleh, 54, who works in a restaurant and lives near the settlement of Psagot.

“America put itself in the same square with the settlers,” he says. “It is the United States of settlements.”

Additional reporting by Sufian Taha