This paper explores the effects of U.S. President Donald Trump’s “liberation day” tariffs on Italian manufacturing enterprises and their forward-looking economic expectations. The evolving U.S. trade policy – marked by escalating tariff threats, temporary suspensions, and eventual negotiation with the EU, culminating in the agreement for a 15% base tariff in July – has created a climate of uncertainty that is weighing heavily on firms’ outlooks. We find that the tariffs significantly reduce enterprises’ expectations for 2025, independent of actual exposure to the U.S. market. We also find that the extent of a firm’s export diversification – measured by the number of foreign markets served – fully explains the variation in expectations. Less diversified firms are shown to be far more vulnerable to tariffs than others. Our findings highlight that exposure to global trade policy uncertainty extends well beyond firms directly engaged with the U.S., underscoring diversification as a critical determinant of resilience. Diversification within the European Single Market proves nearly twice as strong as in extra-EU markets, underscoring its stabilizing role for tariff-exposed firms.

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