From the "shock" of duties the stimulus to grow more

Article by Marco Fortis exclusively for EDI

Made in Italy can also successfully overcome this challenge

Italy's progress in world exports over the last ten years has been extraordinary. From 2014 to 2024, among the G-7 countries, Italian exports grew the most in value (+27.3%), in line with the exports of the United States (+27.4%): an increase, that of Italy, which is more than double the increase in Germany (+12.6%) and France (+10.1%), with Japan (+2.4%) and the United Kingdom (+0.4%) practically at a standstill.

Excluding the Netherlands, whose export values are abnormally inflated by port transits of goods, in 2024 Italy placed itself in sixth place among world exporters, preceded by China, the United States, Germany, Japan and, slightly, by South Korea. In the first half of 2024, for the first time in modern history, Italy even took fourth place among exporters, temporarily preceding also Japan and South Korea.

But perhaps the most significant fact is another, namely the following. Based on World Trade Organization (WTO) statistics, excluding theautomotive, which is not an Italian "specialization" (obviously Ferrari, Maserati and Lamborghini aside), and whose weight in the planet's exports is only equal to 7.8%, in the remaining 92.2% of world exports Italy has risen from ninth place among the exporters it held in 2013 to fourth place in 2023: a position that will certainly also be confirmed by the 2024 data, not yet available. Only China, the United States and Germany precede Italy in this particular ranking. France, Japan and South Korea are clearly behind us. This is thanks to the increased product diversification of Italian exports, which now ranges from fashion to pharmaceuticals, from yachts to furniture, from mechanics to food and drinks, from cosmetics to cruise ships.

Despite the slowdown that occurred in 2024, following the economic crisis in Germany and intra-community trade, Italian exports seem to have recovered at the start of 2025: in the first three months of this year, in fact, they increased in trend terms by 3.2% compared to the same period of 2024. The exports of the other three major Eurozone economies, however, remained at a standstill: Spain +0.1%, France -0.2%, Germany -0.6%.

From an economic perspective, according to seasonally adjusted data from the OECD, in the first quarter of 2025 Italian exports grew by 3% compared to the fourth quarter of 2024: one of the strongest increases among the G-20 and G-7 countries. Furthermore, Italy also achieved the most sustained economic growth in service exports among the G-20 countries: +7.2%.

But what will happen now to Italian exports with American duties?

The “Tatar desert” of Trump's tariffsThe changes of scenario on the tariffs announced by Donald Trump with theLiberation Dayof last April 2nd are now daily. The forward and backward steps of a man who, week after week, seems to have the characteristics of a South American rather than an American president, are no longer countable. In Trump's imagination and populist narrative, there was a moment when Canada and Mexico were cast as America's prime “enemies,” at the top of the list of countries that the American president believed would impoverish the United States. Then, it was China's turn to end up in Trump's sights. More recently it happened in Brussels, with the threat of raising duties on European products from 10% to 50% in the space of a week. This announcement, however, was immediately denied with the postponement of any decision until July 7th and the immediate reopening of US-EU negotiations. The American President did not fail to take it out on Apple too, threatening it with very high duties if it does not decide to produce its iPhones in the United States. Then at the end of May Trump accused China again.

Trump's continuous utterances, between one tweet and another, in addition to throwing global stock markets into chaos, weakening the dollar and American debt, have also had the effect of generating unprecedented uncertainty among operators in the real economy and among exporters. For weeks now, the world has been paralyzed in anticipation of a global trade war which, however, has not yet begun, except in words. With duties currently limited to 25% on cars, aluminum and steel. The key question is: will US tariffs actually materialize in the end, and if so, will they take shape to the extent feared? Or will they instead end up becoming like the imaginary Tartars in the well-known novel "The Desert of the Tartars" by Dino Buzzati: that is, a threat whose arrival Commander Drogo and his companions from the Bastiani fortress have waited in vain for years, scanning the horizon of the desert?

Made in Italy companies must not be afraid but look forwardFor Italian companies, the winning strategy against Trump's protectionist madness is first of all not to stop even for a moment, not to remain paralyzed waiting for something that for the moment is still completely undefined. Also because sensational twists, among other things, are not lacking, such as the decision of the American Court of International Trade, which on May 29th declared the tariffs of theLiberation Day, stating that the President does not have the power to impose them, and against which the US administration immediately decided to appeal. Another Court then suspended the first one's ruling. In short, total chaos. We'll see how it ends.

In the climate of uncertainty that the behavior of the Trump presidency has determined, Made in Italy must continue without hesitation, straight on its path, made of innovation and diversification of products, as well as differentiation of its export markets. It is with these recipes that Italy has already managed to neutralize/compensate for a considerable drop of 6.5 billion in two years, in 2023 and 2024, in its exports to Germany in crisis. How did she do it? Simple: exporting more to the Arabian Peninsula and the Far East.

The positive data of our exports in the first quarter of this year, which we mentioned previously, have been dismissed by some commentators as simple phenomena of hoarding of our products on the US market, in view of the possible imposition of duties. In reality, that's not really the case. It is true that our exports to the USA have increased significantly, in particular of pharmaceutical products, but also of fashion, food, electrical appliances and means of transport other than vehicles. Was this due to hoarding? Hard to say. In any case, it is a fact that, if this had happened, the hoarding would have in this case concerned almost only Italian products and a little German ones (with a boost to Germany's GDP in the first quarter, revised upwards to +0.4%), given the negative dynamics of the exports of other European countries such as France and Spain. It would have been a further demonstration of how Americans consider Italian products irreplaceable.

The reality, however, is that in the first quarter of 2025 not only Made in Italy exports to the USA but also to other non-EU countries grew considerably. A trend that does not change even considering the first preliminary data from April 2025, which showed year-on-year monthly trend declines in our sales in the United States itself and also towards other countries such as Japan and India. In fact, in the first four months of 2025, Italian exports are significantly increasing towards OPEC countries (+14.8% compared to the first four months of 2024) and Mercosur countries (+11.1%). Our exports to OPEC countries were driven, in particular, by fashion, rubber and plastic articles, metals and metal products, machinery and means of transport. Exports to Mercosur countries have instead seen means of transport, machinery and rubber and plastic articles at the forefront. It should be noted that in the first two months of 2025, Italian exports to the United Arab Emirates and Saudi Arabia alone (equal to 2.2 billion euros) exceeded those to China (2.1 billion).

In turn, despite the decline in April, Italian exports to the United States in the first four months of 2025 remain 8.4% higher than those in the same period of 2024, those to Switzerland are at +13.1%, those to Oceania at +4.1%, those to India at +3%. In the first three months of 2025 there was also a certain revival of our exports to EU countries: +5.4% in Germany (with positive results for food and fashion), +9.2% in Spain (exports of furniture, machinery and food did well).

It must be said, then, that we are already experiencing, in fact, a different scenario but with effects similar to those of potential US tariffs. This is the collapse of our exports to China: -10.5% in the first four months of 2025. The new regime of austerity and less ostentation of foreign luxury imposed by the government of the Asian giant has already brought about a profound change in the consumption patterns of the Chinese: more local electric cars and fewer German cars, more made in China and less Western luxury. The negative effects of this new climate did not take long to manifest themselves also on Italian exports to Beijing: in the first three months of 2025 we recorded a -23.6% for our fashion, a -21.4% for our furniture, a -24.3% for our cars. Nonetheless, as we have seen, Italian exports as a whole are holding up quite well. The productive and geographical diversification of Made in Italy evidently pays off and allows us to compensate for any export crises on some markets or in some sectors. It is also our best antidote against Trump's tariffs, if they actually arrive at the feared intensity in the future.

Let's hold on to Made in Italy: it would be wrong to give up the export model just because Trump is hereAccording to some economists, in the Trump era Italy should review its development model if it wants to continue growing. In their opinion, the export of goods, put in difficulty by possible trade wars, would no longer be enough to increase the GDP.

We do not share this view for two reasons. The first is that GDP has always increased in the long term mainly due to the contribution of consumption and investments and only in some years due to the effect of net foreign demand. The second reason is that net foreign demand, if it produces repeated trade surpluses with foreign countries, still makes us richer through an increase in our "assets", specifically with an improvement in our positive foreign investment position. This is true even if the GDP (which in our comparison is a bit forced, but it gives the idea, it is as if it were a "salary"), were to grow little.

Even Germany, which has been in a deep economic crisis for five years if we consider the dynamics of the GDP alone, thanks to the fact that it has a high trade surplus, has nevertheless seen its positive foreign investment position increase by over 1,400 billion euros from 2019 to 2024. This is because, thanks to exports and despite the fact that the latter did not increase the GDP, it is as if Berlin had detached gigantic "coupons" from its trade surplus, "coupons" that have increased its net worth, making it increasingly creditor to the rest of the world.

Italy, which, moreover, unlike Germany, also saw its GDP increase considerably after Covid, did exactly the same. In fact, thanks to the repeated trade surpluses guaranteed by competitive exports, our country came to hold a positive foreign investment position of 335 billion euros at the end of 2024, equal to 15.3% of GDP. This is why, Trump or no Trump, a competitive Made in Italy could make us richer in the future, even without contributing much to the increase in GDP.

The invitation from the Governor of the Bank of Italy to do moreIn his final considerations on 2024, the Governor of the Bank of Italy, Fabio Panetta, outlined a picture of the progress of the Italian economy in recent years and a precise agenda to strengthen them. The progress had its roots in Italy's ability to react to the double "slap" of the international subprime mortgage crisis of 2009 and that of the Greek debt contagion in 2011-2013. With the same ability and determination, Italy can react today to the "slap" of Trump's protectionist policy: a slap which, paradoxically, can even be an incentive to do better.

In summary, the Governor underlined that "over the last five years, despite the pandemic and energy crises, the country has shown signs of a newfound economic vitality. Growth has exceeded that of the euro area. GDP has increased by approximately 6 percent, driven by an increase of almost 10 percent in the private sector. In addition to construction, a significant contribution has come from services, expanding in both the traditional and advanced sectors. Employment has increased by one million units, reaching an all-time high of over 24 million; the unemployment rate fell from 10 to 6 percent.

Panetta underlined that "these results were favored by expansionary policies, but would not have been possible without the restructuring of the productive fabric started after the sovereign debt crisis. Between 2013 and 2023, labor productivity in the private sector increased on average by 0.7 percent per year, while total factor productivity grew by more than 1 percent, marking a clear improvement compared to the period 2000-2013. The share of employees in medium-large companies has increased significantly, and the number of companies with at least 250 employees has increased by a third. The use of advanced technologies, such as cloud computing, robotics and artificial intelligence, has significantly improved over time.

According to Panetta, in particular, "despite the current difficulties, the Italian industry is not destined to decline. Dynamic and competitive companies operate in all sectors, investing in technology and research and positioning themselves in high-end segments. These solid foundations represent a strategic advantage in global competition, but they must be strengthened. Companies must continue along the path of innovation and investment, supported by public policies that put them in a position to successfully face the ongoing transformations". Which? For Panetta, it is urgent to intervene on the cost of energy but above all we need public action aimed at supporting innovation by stimulating private research and investments in technology. This is also to raise wages and productivity.

In conclusion, for Panetta the opinion on the prospects of the Italian economy, despite everything and even Trump, is positive. An Italian newspaper even defined the Governor's Final Considerations as an "anti-grievance manifesto". According to Panetta, "after the shock of the global financial crisis and sovereign debt, we are seeing signs of change: in manufacturing and services, in the financial sector, in the functioning of public administrations, in research capacity. They are signs of vitality that should not be lost. They are not accomplished results, but they represent real progress. It is a concrete basis on which to build, committing ourselves to reforms, fighting positional rents, offering prospects to young people. We - concluded Panetta - have the responsibility and the possibility to do so".