The Italian economy increased by 0.7% in 2023 and 2024, below its medium -term potential at 1% and the average of the euro zone (0.9% in 2024). The economy has proven to be relatively resilient since the end of the cocovated pandemic, benefiting from its industrial and diversified and diversified export sector. Economic production is almost 5%above pre-pale levels, by comparing that of other major EU economies such as France (+ 4%) and Germany (+ 0%), although lower than Spain (+ 7%), Portugal (+ 9%) and the United States (+ 12%).
However, Italy is one of the most vulnerable countries in Europe to the potential consequences of an prolonged trade war given its close trade with the United States. The growing importance of the United States as an export market for Italian manufacturers in the past five years has led to a surplus of substantial bilateral trade, estimated at around Eur 39bn. Only Germany and Ireland have surpluses of greater goods with the United States among countries in the Euro region.
The scope assessments (SPOPE) believe that a scenario involving 20% American prices on imports of EU products and 125% on imports of Chinese products, plus reprisal measures from China and, potentially, of the EU, could reduce the economic growth of Italy by around 0.5-1pp of real GDP in 2025-27. The trade war would slow down in industrial production, exports and investments in increased economic uncertainty.
Exports of Italian products to the United States amounted to 65 billion euros in 2024 (10.4% of total exports, 3% of GDP), with 7% of Italian manufacturing production for the American market. The main export sectors to the United States are pharmaceutical products, transport equipment, cars, machines and luxury products. Italy also exported an average of 10 billion euros in services in the United States between 2021 and 2023 and invested 5 billion euros in foreign direct investment (IDE) on average during the same period (Figure 1).
Figure 1. Exports of dynamism from Italy to the United States, 2019-24
EUR BN (LHS),% of GDP (RHS)
The complete economic impact of prices on Italy remains uncertain, however, taking into account the evolution of the trade regime of the United States and the heterogeneous elasticity of exports, which tends to be lower for patented but higher pharmaceutical products for cars, clothing, drinks and food, except in luxury categories at high prices. Italy’s ability to mitigate the negative effects of American prices will also depend on its ability to diversify and access other export and import markets.
Given global trade tensions, the effective deployment of EU recovery funds by Italy becomes even more important to support interior economic growth. Of the 194.4 billion euros allocated to Italy as part of the establishment, the country has so far received 122.1 billion euros, which is equivalent to 63% of the total of the resources allocated.
