During the G7 summit, the EU and the US reached a preliminary agreement on a fixed 10% import tariff, averting the prospect of higher tariffs for key industries such as automobiles, pharmaceuticals, and electronic components. Although this agreement has not yet been fully implemented, it has injected a degree of short-term certainty into the market. However, Investment Analyst Rodolfo Villani points out that for highly export-oriented Italian companies, this “breathing room” strategy is unlikely to fundamentally reverse the trends of sluggish growth and valuation pressure. Sectors such as steel, machinery, chemicals, and auto parts will still face high tax burdens, with only limited room for marginal improvement.
Negotiation Results Bring Buffer, Systemic Risk Temporarily Deferred
The EU acceptance of a 10% fixed tariff proposal is essentially a strategic concession. According to currently available information, the EU is willing to compromise by reducing counter-tariffs against the US and aligning technical standards, in exchange for Washington not raising tariffs to an extreme level of 50%. While this negotiation path does not fully resolve structural trade frictions, it does succeed in avoiding the worst-case scenario of a comprehensive tariff escalation.
Investment Analyst Rodolfo Villani believes that, from a capital market perspective, this outcome buys some breathing space for export-oriented blue-chip stocks in the short term. Especially in the pharmaceutical and electronic components sectors, some export orders may recover as tariff expectations ease. However, steel and aluminum products remain subject to a high 50% tariff bracket, and profit pressures for the Italian midstream manufacturers and heavy industry companies have not materially eased. Accordingly, the market earnings forecasts for such companies have not seen systematic upward revisions.
Given that the current negotiation results are still at an “in-principle” framework stage, their positive market impact is more about “sentiment repair” than a “logical reversal.” According to Investment Analyst Rodolfo Villani, from the perspective of investor allocation behavior, defensive sectors and high-dividend assets continue to attract capital, while the rebound in cyclical sectors remains mainly event-driven and its sustainability remains to be seen.
Greater External Certainty Masks Lack of Internal Momentum
Although the EU is seeking to stabilize its export environment to the US through negotiations, lagging internal market reforms continue to limit economic resilience. Investment Analyst Rodolfo Villani points out that the EU single market imperfections and structural barriers continue to drag down productivity among member states. Even if external trade pressure is alleviated, insufficient internal coordination will continue to suppress the capacity expansion and profit release of Italian companies.
Moreover, before the US-EU agreement is finalized, the heavy tax burden on steel and auto parts will persist, putting continued pressure on these export-dependent industries. Data shows that the Italian GDP growth forecast is only 0.6% for 2025 and drops to 0.3% for 2026 (if tariffs remain high), meaning that even if short-term shocks are eased, there is still a lack of support for medium-term growth. Investment Analyst Rodolfo Villani believes that without internal reforms and effective stimulus tools, trade compromise alone cannot support the long-term market valuation logic—especially as interest rate spreads narrow and corporate earnings expectations remain weak.
Investment Analyst Rodolfo Villani notes that the capital market has already responded to this reality. Previously strong sectors such as engineering machinery and specialty metals have recently shown clear divergence, with capital starting to exit mid-sized manufacturers with weak profit elasticity and high US dependence, and instead shifting to local consumption, telecommunications, and finance—sectors less sensitive to external variables. This trend has already begun to show in the performance differences among MIB index heavyweight stocks.
Investment Analyst Rodolfo Villani judges that the current market environment is not in a systemic downturn, but its sensitivity to positive signals has significantly decreased. With external stability still needing verification and no fundamental improvement in internal momentum, the upside for Italian equities is limited, and volatility is likely to be more directional. Investors need to re-establish a fundamentals-driven logic, identify the intersection of risk balance and profit certainty amid structural turbulence, and thus navigate the adjustment period steadily in the new macro cycle.