The Italian economy faces a troubling future as Trump’s tariffs could trigger a 1.4% economic downturn between 2025 and 2026. EY’s latest estimates paint a grim picture – the expected 0.6% growth would vanish completely and the country might lose close to €30 billion. These trade tensions pose a serious threat to Italy’s signature export sectors. Confindustria predicts losses could reach 20 billion euros and put 118,000 jobs at risk.

The situation looks even more concerning for Italian textile and apparel manufacturers. Their U.S. exports topped €2.75 billion in 2024 alone. Italian wine makers stand to lose significantly too. Federvini data shows they export bottles worth €2 billion yearly and support nearly half a million workers. Italian manufacturers now face unprecedented challenges as trade relations worsen. Economists caution that if tariffs climb above the current 15% mark, the damage could increase by half.

Trump Imposes Tariffs on Italian Exports

On July 27, 2025, Donald Trump signed a trade agreement with the European Union. The majority of European exports, including Italian goods, are subject to a 15% duty under the agreement. Prior to August 1, Trump had threatened a 30% tariff. Ursula von der Leyen, President of the European Commission, described the 40-minute exchange as a “tough negotiation”.

The deal keeps a hefty 50% tariff on European steel exports. Italy’s government has set up a permanent Tariffs Task Force at the Foreign Ministry to help affected businesses. Foreign Minister Antonio Tajani said talks would continue to work out details for key Italian sectors, particularly wine and viticulture.

The tariff’s burden spreads beyond European exporters. Macrobond/PSC Economics shows U.S. importers bear 53.2% of the cost, American consumers take on 29.1%, and European exporters shoulder just 17.7%. Italian Prime Minister Giorgia Meloni stayed cautiously optimistic about the deal while she waited for complete details.

Italian wine producers face tough challenges from these tariffs. The Italian Wine Union projects losses of 317 million euros in the next 12 months. The price effects tell the real story. A bottle of Italian wine that leaves the cellar at €5 and used to sell for USD 11.50 could now cost nearly USD 15.00. Restaurant prices might jump to USD 60.00 per bottle.

Italian GDP Faces Sharp Contraction

The latest economic forecasts for Italy look bleak. Professional services firm EY projects a cumulative GDP contraction of 1.4% between 2025 and 2026. This decline could wipe out about €30 billion from the economy and erase all previously predicted growth. Before the tariff announcement, Italy’s national statistics agency Istat had expected the GDP to grow by 0.6% in 2025 and 0.8% in 2026.

Italy’s main entrepreneurs lobby, Confindustria, presents a slightly better but still worrying picture. Their analysis shows that 30% tariffs would reduce Italy’s GDP by 0.25% this year. The reduction would grow to 0.59% in 2026 and reach 0.82% by 2027.

The Bank of Italy has cut its 2025 growth forecast to a mere 0.5%. This figure is nowhere near the government’s earlier 1.2% projection. The job market could take a serious hit too, with predictions pointing to 118,000 lost jobs by 2026.

The country might face its first economic downturn since 2022. This setback comes at a tough time as the economy still struggles to bounce back from the post-pandemic crisis. Confindustria has cautioned against European counter-tariffs. These measures could drive up prices and hurt consumer confidence, which would lead to an even steeper GDP decline.

These economic forecasts make it harder for Italy to meet its goal of reducing the budget deficit below 3% of GDP by 2026. The country’s debt level might climb to almost 138% of GDP, remaining the second highest in the eurozone.

Key Sectors Brace for Export Decline

Trump’s 15% tariff poses immediate threats to Italian exports in the American markets. The fashion industry takes the biggest hit, especially textile and apparel exporters who sold over €2.75 billion to the U.S. in 2024. Production has dropped sharply across leather (-15.1%), clothing (-9.5%), and textiles (-5.9%).

The wine industry faces a major market shake-up as new tariffs reshape pricing. Italian wineries’ annual exports of €2 billion could see losses of €317 million next year.

Europe’s biggest export to America – pharmaceuticals – now carries a 15% tariff instead of the threatened 200%. This increase adds billions in costs for drugmakers and could drive up prices for American patients.

The luxury market’s first major slowdown in 15 years leaves brands with tough choices about pricing. Most brands can’t raise prices much more after hiking them 33% between 2019-2023.

American buyers face a 23.5% cost increase on industrial machinery due to dollar depreciation combined with the 15% duty. This worries manufacturers about staying competitive. The automotive sector, already seeing a 19.4% decline in 2024, expects more challenges ahead.

A Turning Point for Italy’s Economy

Trump’s 15% tariff policy has created a wave of economic challenges for Italy’s export-driven sectors. The country faces a GDP drop of 1.4% between 2025-2026, which wipes out all predicted growth. Losses could reach €30 billion and shake fiscal stability. The economy might also lose 118,000 jobs, which adds to these worries.

Export industries are taking the hardest hit. Fashion exporters who used to send €2.75 billion worth of goods to American markets now see their production numbers fall. The luxury sector faces its first major slowdown in fifteen years and must decide whether to absorb costs or raise prices.

These tariffs, though lower than the original threats, force Italian businesses to rethink their American market approach. Economic studies show American importers and consumers shoulder part of the burden, but Italian exporters still face big costs. The government has set up a Tariffs Task Force to handle this challenge, though no one knows if it will work.

The collateral damage goes beyond immediate economic effects. Italy might struggle to keep its promise of reducing the budget deficit below 3% of GDP by 2026. The national debt could climb to almost 138% of GDP, making Italy the eurozone’s second-biggest debtor.

Italy’s economy stands at a turning point. Some officials remain cautiously optimistic, but businesses and workers face tough challenges ahead. Export declines, job losses, and GDP contraction create serious problems for an economy still bouncing back from pandemic-related issues. Without strong policy changes or better trade relations, Italian manufacturers and exporters will face a difficult economic world through 2026 and possibly longer.

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