A few days ago, US President Donald Trump announced, on his ‘Liberation Day’, the beginning of a trade war against the world (read the summary article here). The new tariff policy includes the imposition of a minimum of 10% on all imports into the US and much higher percentages for all goods arriving from a large number of countries, above all Europe, which has been hit with a 20% levy.
What will be the negative repercussions for Made in Italy? What countermeasures will Italian companies have to take to save themselves from trade war 2.0? And what does the European Union intend to do? We assess the situation with lawyer Sara Armella, head of ARcom Formazione and one of the leading European customs experts in Italy.
US President Donald Trump has given yet another jolt to international trade by announcing which countries and products will be affected by so-called reciprocal duties. What does this mean for Italian companies?
The new tariffs launched by President Trump will affect almost all Italian exports. As of April 9th, Made in Italy products will be subject to a 20% levy. This means that our companies have very little time to prepare for the higher costs and to take a series of precautions.
What countermeasures can SMEs take to protect their business from the new tariff blow?
First, you need to know your product and check whether it is affected by the latest levies. There is a list of products that are exempt from the new measures, such as copper, chemicals and pharmaceuticals, wood and semiconductors. However, it is not easy to identify which goods are subject to the new tariffs. Identifying the correct classification of exported products could confirm whether or not the goods being exported are subject to the new duties. It is also a good idea to keep abreast of the latest decisions taken by the US Department of Commerce, which is in charge of implementing these tariff measures.
You also have to perform due diligence on contracts with your clients and check whether the company has agreed to pay the US border duties. This surcharge is foreseen if an Incoterms DDP clause has been agreed upon. If this is the case, the focus should be shifted on the conditions for exercising the right to terminate the contract on the grounds of disproportionate costs, otherwise the company will have to bear the surcharge.
What about the European Union? How does it intend to react?
The EU institutions are moving on a number of fronts. On the one hand, the diplomatic effort to avoid an escalation of the trade war is continuing. On the other, the assessment of which countermeasures to adopt is currently underway. One of these is the Anti-Coercion Instrument, designed for situations where third countries threaten the sovereignty of the Union with measures affecting international trade or investments.
The European Commission has drawn up a new tariff package worth a total of €26 billion to be imposed on iconic Republican States’ products, like Levi jeans, bourbon whisky, peanut butter, and fruit juices. However, negotiations are underway to prevent European products from being subjected to further tariffs by the US. It has already been announced that if the EU burdened bourbon with higher tariffs, the US would respond with a 200% duty on European wine.
At the same time, the Union continues to boost its network of international relations, including finalizing free trade agreements that open up new outlets for European exports. Italian export-oriented companies will be able to exploit these agreements and find new target markets for its products. The US is the main destination for our exports, but looking at new countries can be a solution.
Is it possible for a company to continue selling in the US but from somewhere else?
Relocating production is a complex, costly operation. It requires knowledge of the market you intend to set up in and the rules that govern that country. Using another location to simply transit goods is not a solution. Sufficient processing must have taken place at the place where the goods are shipped to attribute a different origin, otherwise the product is and remains of Italian provenance.
Translation by Giles Foster
