As Prime Minister Meloni prepares to discuss tariffs with President Trump in Washington, factors form a strategic lever in Italy’s broader economic and diplomatic strategy. For example, Italy is witnessing a significant trade and investment imbalance with the United States, as Italian companies invest far more in the US than vice versa, and American-managed European savings play a key role
Driving the news. As Prime Minister Giorgia Meloni gears up to discuss tariff negotiations with Donald Trump in Washington next week, Italy is also re-evaluating the dynamics of its trade and investment flows with the United States.
- Recent analysis shows that Italian companies invest significantly more in the USA than American companies invest in Italy.
- Moreover, European savings—fuelled largely by American financial firms—are also crucial to this economic equation.
Investment imbalance. The latest figures by the Bank of Italy reveal that, in 2023, Italian direct foreign investments in the United States reached €3.5 billion, boosting the stock to €65 billion.
- In contrast, American investments in Italy slightly exceeded €1.2 billion, with a total investment stock of €20 billion.
- Italian enterprises are leveraging the expansive US market, which boasts over 300 million consumers, while the corresponding market for American investments in Italy is limited to about 60 million people.
- This stark disparity underscores that excessive protectionism in the US may not serve the interests of either country.
The financial leverage. Beyond trade, the financial aspect is pivotal.
- Over recent years, US-managed European savings have soared to an estimated €4.5 trillion by the end of 2024.
- As detailed in Mario Draghi’s comprehensive report on European competitiveness, around €300 billion of European savings are invested abroad annually—primarily in the US.
- Italy, known for its high levels of private savings (with household wealth exceeding $10 trillion, more than three times its public debt), often channels these funds into American financial markets, reinvesting in Italy, generating value and wealth.
- However, a tightening of protectionist measures could disrupt this cycle, potentially depriving Wall Street of vital capital, which would have adverse consequences for asset manager growth.
Policy implications. This dual dynamic—where significant investments and expansive financial flows buoy Italy’s trade surplus with the US—poses opportunities and risks.
- The current scenario suggests that an overly protectionist stance that hinders Italian investments in the US would be counterproductive for both economies.
- Instead, fostering a balanced environment where tariffs are negotiated to maintain open financial channels is a strategic lever Meloni can deploy in Washington.
