Tariffs Hit the West. Growth Moves South.

The headline numbers on the tariff shock tell you it happened. They don’t show what it actually looks like inside a company that has to live with it.

Two countries make that clear: Germany and Italy, both with as much riding on the US relationship as almost anyone in Europe.

Germany’s auto industry takes the direct hit

The US set a 15% tariff on European cars from August 2025, on top of an existing 2.5% duty, down from a threatened 25%. It still hurt. German automakers sold around 409,000 cars in the US in 2025, worth about €24.5 billion, adding an estimated €2.5 billion in tariff cost. Auto exports to the US fell nearly 14% in the first three quarters of 2025.

Volkswagen expects a tariff hit of up to €5 billion for 2025. Mercedes-Benz’s profit was cut roughly in half. Porsche’s operating profit dropped sharply. Steel tariffs made things worse too: Section 232 rates hit 50% by June 2025, and the European steel industry has lost some 30 million tonnes of production since these tariffs first appeared in 2018. The roughly 760,000 EU vehicles exported to the US in 2024 carried an estimated one million tonnes of embedded European steel, now at risk as the vehicle tariff makes those exports less viable. (Sources: Munich Eye, gmk.center)

The wider German export picture

Exports to the US overall fell 7.8% in the first three quarters of 2025, a sharp reversal after years of growth. Machinery exports fell 9.5%. Pharma exports actually grew, but only because shipments got pulled forward before an exemption ran out, not because of real strength. If the tariffs hold through 2026, German economists estimate it could cost the country 1% of GDP and over 100,000 manufacturing jobs. (Source: IW Köln)

Italy: wine, cheese, and cars nobody else can build

Italy’s exposure looks different but lands just as hard. The US is Italy’s largest non-EU trading partner, worth roughly €65 billion in exports in 2024. Its tariff rate has shifted too, now 10% under a newer framework, plus steel and aluminum tariffs of up to 50% on top.

Wine tells the sharpest story. Italian wine exports to the US, worth €1.9 billion in 2024, fell 9.2% in 2025, and the decline had grown to 20% below year-ago levels by early 2026. Parmigiano Reggiano and other protected cheeses face tariffs of 15 to 50%. Olive oil carries an estimated extra €140 million burden, pasta close to €74 million. Total agri-food losses are expected to top €1 billion. (Sources: Vinetur, Forbes)

What the damage actually adds up to

Estimates vary. Confindustria puts total losses at €20 billion and 118,000 jobs. Another estimate lands closer to €18-22 billion once supply chain and investment effects are included. Nobody has an exact number yet, but every estimate sits in the same double-digit-billions range. (Sources: Grassi Advisors, Rinnovabili)

Ferrari’s answer

Automotive makes up 5.5% of Italy’s exports. Ferrari, Lamborghini and Maserati build nothing in the US, so the tariffs hit in full. Ferrari raised prices by up to 10%, but chose to absorb the cost itself on three models: the Roma, the 296 and the SF90. Its own filing for the quarter ending June 2025 showed no real impact yet, because most of what it sold that quarter had already shipped before the new rates began. Same pattern as the wider trade data, just visible on one company’s books. (Sources: Al Jazeera, Ferrari SEC filing)

Where the growth is actually coming from

Both countries are answering the pressure differently. In Germany, China overtook the US as the country’s top trading partner in 2025, worth €251.8 billion. That’s not a German export win into China though: it reflects rising imports from China alongside falling exports to the US. German firms are running a dual strategy instead, deepening their position in China’s market while also diversifying production toward Southeast Asia and India to spread the risk. (Source: Destatis)

Italy’s shift looks more like the model Callaborade is built around. Non-EU exports grew 4% in 2025 despite declines in the US, Russia and Japan. Trade with Africa hit €60 billion in 2024, and Italian companies already run steel and textile plants in Tunisia, car factories in Morocco, and manufacturing in Nigeria, drawn there by lower production costs and real market access, not just goodwill. (Source: Decode39)

What both stories point to

A factory in Tunisia or Morocco is a capital decision. It doesn’t come with someone who can actually sell into the region, someone who understands the market well enough to build a pipeline, not just run a production line.

That gap shows up in every number here. Germany diversifying into Southeast Asia and Italy building factories in Africa are both, underneath the production story, talent problems still waiting to be solved. The exporters who close that gap now, while everyone else is still absorbing the shock, are the ones who’ll have a real foothold before the market gets crowded.