The challenge of Made in Italy.

“Made in Italy” is globally renowned for its exceptional quality, but it now faces serious challenges. Industrial production in 2024 is expected to decline by 3.5% compared to 2023, marking a 15% contraction since its peak in April 2022.

The year 2025 will be crucial for the future of manufacturing, as Italy finds itself at the center of a structural transformation that could redefine its role in the global industrial supply chain. The challenges facing Italian manufacturing cannot be attributed to a single factor, nor are they solely the result of domestic policies. Instead, the industry has undergone two decades of global shifts—including economic, technological, and geopolitical changes—that have put its competitiveness to the test. The 2008 financial crisis had a profound impact on Italy’s manufacturing sector. The resulting credit crunch forced many companies to cut costs, starting with workforce reductions, which led to a loss of critical skills and had a direct impact on productivity and innovation.

Although the adoption of advanced technologies, such as artificial intelligence and Industry 4.0, has optimized production processes, many companies—especially small and medium-sized enterprises—struggle to keep pace with innovation. At the same time, the global economic landscape has changed significantly. Companies that previously relocated production to China for cost savings now find this strategy increasingly risky due to escalating trade tensions. Tariffs and technological restrictions have forced many Italian firms to reconsider their internationalization strategies, opting for reshoring or relocating to other parts of Asia and Eastern Europe. Additionally, sanctions on Russia have reduced export opportunities in key industries such as machinery, luxury goods, and agri-food, pushing Italian businesses to seek new markets in North America, the Middle East, and Africa.

The United States’ Inflation Reduction Act is further intensifying competitive pressures by incentivizing domestic industrial growth. Following Donald Trump’s re-election in 2024, protectionist policies have surged, reshaping global trade dynamics. As a result, many Italian companies have redirected their investments to the U.S., creating new challenges for Italy’s economy and manufacturing sector. Rising energy costs present another major test: geopolitical and economic factors have driven up natural gas prices, while the ongoing Russia-Ukraine war has caused supply disruptions. Russia’s reduced gas exports have forced Italy to seek alternative sources, further increasing demand and prices, placing a heavy burden on energy-intensive industries.

As global trade slows, Italy faces mounting difficulties in expanding its market. The U.S.’s new tariff policies may further worsen the situation—if Germany’s export industry is hit, Italy, as a key supplier of components and intermediate goods to German manufacturers, will also suffer. In 2024, Italy’s exports to Germany are projected to decline by €3 billion, reflecting the deepening struggles of Europe’s largest economy. Against this backdrop, Italy’s investment outlook for 2025 appears bleak. Even with EU funding, manufacturing growth remains stagnant, and investment in machinery and equipment is expected to decline, signaling a lack of business confidence and growing hesitation toward long-term investments amid increasing economic uncertainty.

**Photo reference: https://www.virosecurityclub.com/made-in-italy-the-quality-of-a-brand/ **