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Bank of Italy: Panetta on Trump’s tariff war, ‘Trade wars also harm the countries that initiate them’

The governor of the Central Bank of Italy warns of risks to the global economy from the use of tariffs as negotiating leverage

At the 31st annual Assiom Forex Congress in Turin, Fabio Panetta, Governor of the Bank of Italy, highlighted the dangers of trade wars, pointing out that, historically, they also damage growth in countries that initiate them. Panetta suggested that the US administration’s tariff announcements could be used as a negotiating lever to redefine economic and political relations at the global level.

However, the governor also warned that, in a context already marked by geopolitical and trade tensions, such a strategy could spiral out of control, with destabilising effects beyond initial intentions. Panetta reiterated the importance of solutions based on cooperation to avoid a spiral of conflict that threatens global stability.

On the economic front, Panetta analysed the impacts of the tariffs announced by US President Donald Trump. If implemented, these could reduce global growth by 1.5 percentage points, with an impact of more than 2 per cent on the US economy. For the eurozone, the consequences would be smaller, around half a point, but with greater effects for Germany and Italy, due to their strong trade with the US.

Panetta then spoke of the uncertainty over trade policies, which could amplify the negative effects. Although an increase in US tariffs on European exports would not have a significant impact on inflation, volatility in energy markets, particularly in the gas sector, is a greater risk. The governor concluded by saying that even with a forecast of slowing global demand, the situation should be monitored carefully.

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