Italy's economic outlook faces significant uncertainty due to potential tariffs imposed by the U.S. administration under President Trump.

These tariffs could directly impact key Italian sectors, creating a range of potential scenarios from minimal economic impact to a scenario where growth projections for 2025 and 2026 are completely nullified, leading to two years of stagnation.

In the best-case scenario, the impact of these tariffs may lead to a decrease of only a few tenths of a percentage point in GDP. In a more detrimental situation, the decline could exceed half a percentage point, effectively negating growth that analysts had anticipated for the coming years.

Key industrial sectors, including machinery, pharmaceuticals, and food products, will be heavily affected, particularly those already facing challenges such as the automotive industry.

The search for new markets will be a lengthy and challenging process, providing only partial relief from the repercussions of the tariffs.

Italy is particularly vulnerable to these trade measures, sharing this exposure with Germany.

The U.S. is Italy’s second-largest export market, seeing substantial growth since the pandemic with approximately €65 billion in sales, representing around 3% of Italy’s GDP. The indirect exposure through the sale of intermediate goods to other domestic or foreign companies that subsequently export to the U.S. further complicates the situation.

Confindustria estimates that the American market accounts for about 7% of Italy's industrial production, emphasizing the potential consequences of these tariffs depending on their scope, duration, and scale.

According to industry economists, such as Lorenzo Forni of Prometeia, not all exports to the U.S. would be significantly affected if tariffs are strategically applied.

Should tariffs be uniformly set at 15% across all goods, analysts from Goldman Sachs predict a European GDP decrease of approximately seven-tenths of a percentage point, suggesting a similar stagnation scenario for Italy.

Key export products from Italy—ranging from industrial machinery to pharmaceuticals, automobiles, wine, Parmesan cheese, and leather goods—are at risk of being adversely affected.

Sectors like pharmaceuticals and alcoholic beverages heavily rely on the American market, which is their largest globally.

The impact on specific products can vary; goods with high added value and brand recognition may have a better chance of offsetting tariff costs on consumers.

Conversely, small businesses, often less advanced technologically and more reliant on steady demand, may be disproportionately affected.

Tariffs are also expected to exert upward pressure on prices.

While many anticipate a price surge in the U.S., retaliatory measures from Europe may lead to increased inflation across the Atlantic as well.

The Governor of the Bank of Italy, Ignazio Visco, has indicated that the prevailing uncertainty necessitates caution regarding interest rate reductions.

In March, Italy saw a rise in inflation driven by energy prices.

Despite concerns about escalation, analysts generally anticipate that the immediate impact on European inflation will be minor and temporary, with estimates suggesting increments of between three to five-tenths of a percentage point, thus not jeopardizing the broader inflationary decline.

However, in the medium term, protectionist policies may exert a more substantial depressive effect on growth by curtailing demand, while increasing supply through products rejected at U.S. borders.

This dynamic could lead to lower inflation rates, and possibly even lower interest rates within Europe.

In contrast, the U.S. may face a challenging scenario characterized by concurrent inflation and stagnation.

In response to the looming trade tensions, the Italian government is implementing a strategy aimed at expanding exports into new markets.

This initiative targets several mature economies, such as Japan, and emerging markets including the UAE, Vietnam, and India.

However, this pathway to market diversification is fraught with challenges.

Even in ideal conditions, such as the establishment of new free trade agreements by the European Union, the benefits of this strategy may only partially offset the downturn in the U.S. market.

Additionally, a potential mitigating factor for the negative impact on growth from the ongoing trade conflict may be the proactive response from European nations, particularly Germany.

Increased public investment in Germany is set to materialize over the coming years, coinciding with an anticipated European rearmament initiative.

There remains uncertainty regarding how the Trump administration will adjust its tariff strategy should it recognize that such measures do not effectively address the trade deficit.