MNI BRIEF: Tariffs Slash Italian Growth, Inflation Stable –BOI

The U.S. decision to impose 20% tariffs on European imports will cut Italian GDP growth to 0.6% in 2025 (0.2 percentage points lower than projected in December) and to 0.8% in 2026 (0.3 points lower), according to macroeconomic projections released on Friday by the Bank of Italy.

Inflation is expected to remain broadly stable at 1.6% in 2025 and 1.5% in 2026, it said.

The Bank of Italy said the projections incorporate “initial and necessarily limited assessment of the impact of the tariffs announced on 2 April.” The outlook does not include any potential effects from retaliatory measures by the European Union or other countries, nor broader repercussions for global markets. (See MNI SOURCES: Tariffs Make ECB More Likely To Cut In April)

While exports will be “strongly affected” by the new tariffs, the Bank expects domestic demand to support growth, helped by a recovery in household disposable income.

Inflation could temporarily rise in the event of EU retaliation, but the Bank noted that a more pronounced decline in demand, should trade restrictions tighten further, “would have opposite effects, which would tend to prevail towards the end of the three-year forecasting period”.