The effects of US tariffs on Italian firms: an ex-ante micro-level perspective

This analysis provides an ex-ante assessment of the potential effects of the 2025 US tariff shock on Italian firms, combining granular data on trade, firm balance sheets, and supply-chain linkages. First, we highlight some key specific features of the US tariff shock that can affect the impact on Italian firms. Then, we focus on three key mechanisms: (i) the direct effects on Italian exporters to the United States; (ii) the indirect effects on Italian suppliers of those exporters; and (iii) the trade deflection of Chinese exports displaced from the US to other world markets. We also find that, for direct exporters, the tariffs are expected to reduce profit margins by about 0.3 percentage points on average in the short run, with limited impact on firms' overall profitability. Most domestic suppliers have a low exposure to the US market through their customers, though a subset of highly exposed small firms may face sharper profit declines, potentially affecting local employment. Finally, trade deflection resulting from the redirection of Chinese exports displaced from the US market poses moderate, but non-negligible, risks for Italian exporters, concentrated in sectors that differ from those more directly exposed to US markets. Conversely, increased imports of intermediate goods from China could lower input costs for some Italian producers.