Effects of U.S. Tariffs: Assessment Across Mechanics and Fashion Industries Sector by Sector
The 15% tariffs imposed by the U.S. on Italian exports in 2024 are expected to have a significant and uneven impact on certain sectors, particularly those with high export volumes to the U.S.
Sectors Most Affected
The mechanical sector, including industrial machinery and transportation, is notably exposed due to its high export volumes to the U.S., particularly transport equipment and industrial machinery. The chemical-pharmaceutical sector is also likely to be affected through increased costs and pricing pressures.
The fashion and luxury goods sector, while absorbing part of the tariff to maintain their competitive edge in U.S. markets, have seen some price increases. The agrifood sector, including PDO cheeses, olive oil, and Italian wines, is vulnerable to tariffs ranging between 15% and 50%. Transport equipment manufacturers are exploring the possibility of relocating or establishing operations in the U.S. to mitigate costs.
Exchange Rate Considerations
The euro’s appreciation against the dollar exacerbates the problem, making Italian exports more expensive in the U.S. independent of tariffs. This combination further harms competitiveness. While the U.S. consumer market remains robust, the heavier cost burden may reduce demand for affected sectors.
Regional Distribution
The damage is concentrated in Northern Italy, where these key export industries are mostly located. The North, the most industrial and export-oriented region, is predicted to be the most affected, with a total of 5,894 million euros in exports, accounting for 68.32% of the total. Valle d'Aosta and Trentino Alto Adige are expected to experience the most significant reduction in exports, with -34% and -19% respectively. However, it's important to note that the stock of exports in these regions is low compared to the larger regions.
Broader Economic Impact
The EU-wide estimates predict GDP losses between 0.2% and 0.8%, with Italy among the more affected countries. The tariff causes distortions, increasing costs for exporters and consumers, while some exporters may absorb costs partially to preserve market share. The precise impact hinges on tariff pass-through levels and how currency movements evolve.
In summary, the 15% U.S. tariffs on Italian exports coupled with euro appreciation lead to increased costs and reduced competitiveness, hitting the mechanical, chemical-pharmaceutical, fashion, agrifood, transportation, and luxury sectors primarily concentrated in Northern Italy the hardest in 2024. The overall economic damage, while mitigated somewhat by resilient U.S. demand, signals a notable challenge for Italian exporters and regional economies in the North.
[1] Source: Economic Impact Assessment of U.S. Tariffs on Italian Goods (Unimpresa Research Center) [2] Source: EU-wide Estimates of the Economic Impact of U.S. Tariffs on European Industries (European Commission) [3] Source: The Economic Consequences of U.S. Tariffs on Italian Exports (Italian Ministry of Economy and Finance)
- The transportation industry and the business sector, particularly transport equipment manufacturers, are considering relocating or setting up operations in the U.S. to reduce costs due to the increased prices caused by the 15% tariffs on Italian exports.
- The mechanical sector, including industrial machinery, faces significant costs and pricing pressure as a result of the tariffs, while the finance industry might also be affected indirectly through the increased costs for businesses in affected sectors.
