Italy's leading business organization, Confindustria, has revised down its economic growth projection for the country, citing concerns over potential U.S. trade tariffs that could exacerbate the economic outlook. The U.S. President's forthcoming tariff plan has raised global apprehension among businesses, consumers, and investors about a deepening trade conflict.

Confindustria now anticipates Italy's gross domestic product (GDP) to rise by 0.6% this year, compared to the government's optimistic 1.2% forecast and down from Confindustria's previous projection of 0.9% made in October. The organization foresees a GDP growth uptick to 1% in 2026 following the modest expansions of 0.7% recorded in both 2024 and 2023.

Although Italy saw a minimal growth of 0.1% in the final quarter of the preceding year after a standstill in the third quarter, analysts do not anticipate a substantial acceleration in the short term. While Confindustria's forecasts take into consideration existing U.S. tariffs on steel and aluminum, as well as significant trade policy uncertainties, they do not account for the potential ramifications of a worsening trade dispute.

In a pessimistic scenario where the U.S. imposes permanent 25% tariffs on all imports, escalating to 60% for China, and other countries retaliate with similar measures, Italy's GDP growth could plummet to around 0.2% in 2025 and 0.3% in 2026 according to Confindustria.

The sectors most vulnerable to U.S. market disruptions include pharmaceuticals, automobiles, and machinery, which heavily rely on exports to the U.S., Italy's second-largest export destination after Germany.

Contrary to Confindustria's revised forecast, the International Monetary Fund and the Organisation for Economic Cooperation and Development project a 0.7% growth for Italy this year.

(Adapted from original content by Alvise Armellini, editing by Gavin Jones)