Things are heating up with the Palestinian boycott of Jewish settlement products. The Palestinian Authority has recently passed a law prohibiting the sale of such goods, with potential fines and prison terms imposed on those that flout it. The authority has dispatched 3,000 volunteers to canvass door to door in the West Bank, explaining what products should be boycotted and why.

According to the Washington Post, at least 17 businesses within the largest settlement bloc, Ma'ale Adumim, have closed as a result of the boycott campaign that took off earlier in the year, while the PA has confiscated $5m-worth (£3.5m) of settlement goods across the West Bank.

The reaction to all this in Israel has been a combination of bluster, threats and outrage premised on a theme of: how dare those ingrates.

Settler groups, who you can imagine may see a Palestinian sneezing and call it germ warfare, have decided that this boycott amounts to "economic terror".

An opinion piece in Israel's mass-market daily, Yediot Aharonot, warns the PA that "the boycott game can go both ways".

Uri Ariel, an Israeli minister (of the far-right National Union party), is already cooking up a counter-boycott and sanctions proposal. The Israel Manufacturers' Association has said that Israel should close its ports to Palestinian exports until the boycott is lifted, and Israel's prime minister, Binyamin Netanyahu, has just chimed in and called the campaign self-destructive.

All of which has skewed a few key components of this scenario. First up – and as PA officials have been careful to point out – trade agreements between Israeli and Palestinian authorities do not apply to Jewish settlements in the occupied West Bank, since they are defined as illegal under international law.

Second, Israel has for years been ignoring the very treaty that the PA is now accused of breaching. The Paris protocol trade agreements, part of the Oslo Accords, are supposed to guarantee the free movement of goods between Israel and the Palestinian territories – but in reality, that's mostly a one-way flow. Israeli checkpoints, roadblocks and other restrictions constantly thwart Palestinian exports to Israel, while the Palestinian market is flooded with cheap Israeli imports that stunt the local economy.

Dr Samir Abdullah Ali, director general at the Palestine Economic Policy Research Institute, points out that even clauses specifically contained in the treaty to rebalance trade inequities are flouted. So, for example, the agreements include a quota for the Israeli import of key Palestinian agricultural items such as tomatoes, cucumbers and watermelons – but it is never met. Meanwhile, Palestinian exports destined for foreign markets are routinely delayed by port authorities, and registration licenses are withheld for pharmaceutical or other industrial products (solar water heaters, for instance) so they cannot enter the Israeli marketplace.

In practice, it all adds up to an undeclared embargo on Palestinian goods – not calling this a boycott doesn't mean that it isn't one. And to add some context to the PA's ban on settlement goods: these represent $200m of the estimated $3bn–$3.5bn that Palestinians spend annually on Israeli goods and services.

In other words, the outrage could be summarised as a case of Israel not liking the taste of its own medicine. The strength of the PA-backed settler goods ban must have come as a shock, but Israel is not supposed to enjoy being boycotted – and its approval of this campaign is not required.

• Comments on this article will remain open for 24 hours from the time of publication but may be closed overnight