The "Golden Age" of the U.S., as proclaimed by the 47th President, Donald Trump, in his inaugural speech, could have serious repercussions for countries that currently export more to the U.S. than they import. Trump emphasized the need to address the U.S. trade deficit, stating that European countries in particular would face tariffs if they fail to correct trade imbalances.

"Europe has treated us very badly, and I will do something about our trade deficit with the EU," he declared in a video address at the World Economic Forum in Davos, further expressing that the U.S. has numerous grievances with the European Union.

The trade deficit, currently more than $1.1 trillion annually, has worsened significantly from the roughly $500 billion deficit in 2017 when Trump began his first term. According to U.S. Census Bureau data, Europe is expected to record a surplus of over $213 billion in 2024. In response to Trump’s threats of imposing new tariffs on European products, EU Economy Commissioner Valdis Dombrovskis has stated that the EU is prepared to defend its interests and will respond proportionally, just as it did during Trump’s first term. The possibility of a trade war looms large.

For Italy, the stakes are high. The country currently enjoys a trade surplus with the U.S. of €43 billion, which positions it as one of the key European players in U.S.-EU trade. Of the $1.1 trillion trade deficit, around $230 billion is attributable to EU countries, with Italy being a significant contributor. In fact, Italy is ranked third in terms of the trade surplus with the U.S., following Germany, which holds a €80 billion surplus. When factoring in the weight of Italian exports to the U.S. relative to its GDP, estimates suggest that additional tariffs, such as a 10% levy on global exports or a 60% tariff on Chinese goods, could have a contractionary effect on Italy’s economy similar to that of Germany. This highlights just how pivotal the U.S. market is for Italy.

The U.S. is Italy's third-largest export destination, with Italian products expected to be worth €66.4 billion in 2024, following Germany and France. According to Istat, the regions leading the charge in exports to the U.S. are Lombardy (€14.4 billion), Emilia-Romagna (€10.4 billion), and Tuscany (€9.1 billion). However, by November 2024, a decline of 11.1% in Italian exports to the U.S. was recorded, signaling potential turbulence ahead due to the threat of tariffs.

The primary battleground for this trade issue is at the European level. Europe is preparing to respond to Trump’s threats, with the EU standing ready to defend its interests if new tariffs are imposed. In his first term, Trump had already levied a 25% tariff on steel and a 10% tariff on aluminum imports. In retaliation, the EU targeted iconic U.S. products, including Harley-Davidson motorcycles and whiskey. However, by 2021, the dispute was resolved and tariffs were lifted.

For Italy’s food sector, the U.S. remains a critical market. In 2024, Italian food exports are expected to hit a record, possibly approaching €70 billion. The U.S. is a major driver behind this growth, with exports to the U.S. rising by 18.4% in the first ten months of 2023 alone. This strong performance means that by the end of 2024, Italian food exports to the U.S. are forecasted to reach €7.8 billion, placing the U.S. just behind Germany as the leading foreign market for Italian food. However, the looming threat of tariffs could significantly impact this growth, potentially overshadowing the impressive gains made so far.

Similarly, in the fashion sector, the U.S. is Italy's third-largest export market, with Italian fashion exports expected to reach €3.7 billion in 2024. France remains the primary market, with €5.9 billion in sales, but the U.S. outperforms other markets such as eyewear, jewelry, and cosmetics, where it ranks second with €2.5 billion, just behind Turkey (€3.4 billion). This indicates that, despite fierce competition, the U.S. remains a top destination for Italian luxury and lifestyle products.

Looking at the broader context, the trade relationship between Italy and the U.S. has grown consistently over the past decade. Since 2013, Italian exports of goods and services to the U.S. have nearly doubled, rising from $48.3 billion in 2013 to $80.5 billion in 2022, a 66.6% increase. Meanwhile, U.S. exports to Italy have risen by 47% over the same period. The U.S. has consistently been the third-largest destination for Italian goods, with exports surging from just over €3 billion in 1981 to more than €65 billion in 2022, representing a remarkable growth trajectory. This strong trade relationship underscores the importance of the U.S. market to Italy’s economic well-being and highlights the potential risks posed by any new trade barriers that Trump’s administration may impose.

In conclusion, the trade ties between Italy and the U.S. are essential, not only in terms of raw export numbers but also in terms of Italy’s global economic strategy. The U.S. market is a cornerstone of Italy’s exports, particularly in key sectors like food, fashion, and luxury goods. Any disruptions in this vital relationship could have significant ripple effects across the Italian economy.