Impact of US Tariffs on Italy's Economy: A Looming Concern

The looming threat of 30% U.S. tariffs on European Union goods presents a significant economic challenge for Italy, with the possibility of shaving up to 0.8% off the country's gross domestic product by 2027. This warning was issued by Italy's leading business lobby in the wake of ongoing transatlantic trade negotiations. While President Donald Trump has set an initial date of August 1 for these tariffs to take effect, his trade chief, Howard Lutnick, expressed optimism on Sunday about reaching an agreement with European delegates before that time.

Should these 30% tariffs materialize without EU countermeasures, Italy's GDP could witness a 0.25% reduction this year alone, progressively increasing to a 0.59% decline in 2026 and up to 0.82% by 2027, according to projections by Confindustria's research arm. Italian exports such as machinery, pharmaceuticals, cars, and renowned food products like olive oil, pasta, cheese, and wine are particularly vulnerable under such trade restrictions.

In an additional stark forecast from the professional services firm EY, the Italian economy could experience a 1.4% GDP contraction during the years 2025 and 2026, essentially nullifying any anticipated growth for that span. Meanwhile, the country's business lobby insists that the only satisfactory U.S. tariff level would be zero, especially given that EU exports are already suffering due to a weakening dollar, which has depreciated over 12% against the euro in the year. As of now, the exchange rate sits at $1 equating to 0.8593 euros.

(With inputs from agencies.)