Trump’s Tariff War: Markets on Alert

Translated by Elena Santanelli 

The desire to make the United States once again an economic and military superpower has always been a cornerstone of Donald Trump’s political rhetoric. Last week, in an attempt to pursue this ambitious goal, the US President announced the introduction of new and heavy tariffs on a long list of countries, which also includes many of the country's historical economic partners. The President’s strategy is aimed at reducing the trade deficit of the United States and incentivizing domestic production through targeted tariff barriers that will discourage the import of foreign goods.

Effects on Financial Markets

President Trump’s announcement of new tariffs opened a floodgate of panic across the global financial markets, leading to what many analysts called “Black Monday”. Asian stock exchanges were the first to react to the US threats, recording significant losses that reached -9.7% on the Taipei Stock Exchange and -9.2% for Hong Kong’s Hang Seng index.

In Europe, the market openings were equally disastrous, wiping out about 890 billion euros in capitalization. Frankfurt's DAX opened 9% lower, Milan's FTSE MIB lost 7.6%, meanwhile, the London Stock Exchange saw a drop of 5.2%.

In the United States, Wall Street also followed the global negative trend, with the S&P 500 falling by 3.6% when the market opened last Monday. Once the news was digested, the markets regained confidence and, by the end of Monday, the indexes of the major trading markets rose.

In the face of this volatility, President Trump minimized concerns, declaring that “sometimes you have to take medicine to fix something”, underling his determination to pursue an aggressive trade policy to achieve his goal despite negative reactions from the markets. 

Effects on the Italian Economy

The introduction of the new US tariffs is expected to have a significant impact on European trade and Italian exports. According to an analysis by ISTAT, in 2024 the United States attracted about 10% of the Italian exports, which represents more than one-fifth of the total sales to the non-European markets. The application of the tariffs announced by the Trump administration could therefore cause significant damage to the Italian economy.

For Italy, the consequences of the newly introduced tariff barriers are particularly concerning. Indeed, the Italian product chain is strongly export-oriented, particularly in equipment and machinery, advanced manufacturing, and agri-food products. Moreover, the Bank of Italy has warned that a tightening of US tariffs would have “significant effects on the Italian firms that export to the US market, especially small and medium-sized ones.”

Trade restrictions would also negatively affect manufacturers who, while not directly exporting, supply essential subcomponents for goods intended for the United States. Indeed, the tariffs will also bring indirect effects such as rising costs of the raw materials and semi-finished products imported from the United States. The increasing production costs will erode profit margins for Italian companies and slow down industrial activity, especially in the North of the country, where the main export-oriented manufacturing districts are located.

Political Reaction

The new tariff measures imposed by President Trump not only raised concerns among the country’s major trading partners, but also economically impacted many US companies. Major US tech giants, including Google, Microsoft, HP, and especially Apple, have suffered significant losses on the stock market following the President’s statements. In particular, the Cupertino giant was the hardest hit due to the company's supply chain. For years, Apple has distributed the production stages for components and devices across countries such as India, China, and Vietnam to reduce production costs and maximize profits and widespread distribution across the major global markets. 

A strong opposition has also come from Elon Musk, CEO of Tesla and President’s right-hand man in charge of the newly established DOGE (Department of Government Efficiency), who sharply criticized Peter Navarro, the tariff architecture, pointing out the fact that such tariffs inevitably ruin the most complex supply chains.

In response to the US tariffs, the European Union is trying to reduce political tensions and calm the economic alarm by offering an agreement to remove tariffs on all industrial products. European Commission President Ursula von der Leyen stated, “We stand ready to negotiate with the US. Indeed, we have offered zero-for-zero tariffs for industrial goods as we have successfully done with many other trading partners.” Despite this, the EU has also prepared countermeasures, proposing 25% tariffs on certain US imports if the negotiations fail to produce concrete results.

In Italy, Prime Minister Giorgia Meloni announced a meeting with President Trump in Washington on April 17 to discuss the new tariffs imposed on European Union imports. Meloni criticized these measures as “wrong” and underlined that such protectionist policies will end up ruining both the European and the United States economy. President Meloni, who expressed her support for the European Commission's proposal for a “zero-for-zero” agreement on industrial tariffs, will seek to defend Italian industry, which last year recorded exports to the United States worth 40 billion euros.

Although stock market indices have risen after absorbing the blow from the Trump administration’s announcement, it is important to maintain a cool caution regarding what will happen in the coming hours. The US administration’s decisions, which some consider reckless, while others judge them as drastic but calculated, remain highly unpredictable and subject to change.

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