Italy warns against counter-tariffs on US, calls for budget leeway

Italian Economy Minister Giancarlo Giorgetti warned on Saturday against the imposition of retaliatory tariffs on the United States in response to President Donald Trump’s announcement of sweeping import duties on trade partners.

Speaking at a business forum near Milan, Giorgetti said Italy was aiming for a “de-escalation” with the US.

Under Trump’s plans announced on Wednesday Italy, which has a large trade surplus with the United States, will be subject to a general tariff of 20% along with other European Union countries.

“We should avoid launching a policy of counter-tariffs that could be damaging for everyone and especially for us,” Giorgetti said, adding “we must try to keep a cool head.”

To offset the negative economic impact the tariffs were likely to have, Giorgetti said the European Union should allow member states to raise spending without breaching the bloc’s fiscal rules.

High-debt Italy frequently calls on the EU to allow more budget leeway.

Under EU governance, commitments agreed with the European Commission to cut public spending can be put on hold in the event of a “severe economic downturn” in the eurozone.

The Bank of Italy said on Friday the euro zone’s third-largest economy would grow by just 0.5% this year, less than half the government’s 1.2% forecast made in September.

“In recent days there has been talk of aid for companies, but aid for companies is a state intervention that must be allowed under EU rules,” Giorgetti said.

Italy has committed to bringing its deficit below the EU’s 3% of gross domestic product ceiling in 2026 from 3.4% in 2024, a task made harder by its faltering economic growth.

The government is expected to cut its growth forecast for this year and 2026 next week, when it presents multi-year economic projections.

“The Italian public debt means reduced budget room for our country, a constraint that must be taken into account in any decisions we make,” Giorgetti said.

Italy’s debt, proportionally the second highest in the euro zone, is currently seen rising to almost 138% of GDP in 2026 from 135.3% last year.