Italy ended 2025 with a historic economic feat: it surpassed Japan to become the world’s fourth-largest exporting nation. In doing so, Italy has leaped from seventh place to fourth in global export rankings within a decade. This achievement, certified by recent OECD data, marks the first time Italy has officially “dethroned” Japan in export volumes, a significant step once thought improbable for a country long maligned as Europe’s economic laggard. The Italian trade surge also boosts its standing in Europe: Italy is now the continent’s second-biggest exporter (after Germany), with exports constituting about 40% of its GDP. Despite Italy’s notorious public debt and deficit woes, its trade balance recorded a hefty €54.9 billion surplus in 2024. These figures tell a surprising story of revival, challenging the old narrative of Italy as a declining “museum” economy and signaling an export renaissance built on niche strengths, quality manufacturing, and policy-driven modernisation.
Upending the “Decline” Narrative
For much of the past two decades, international observers routinely wrote off Italy as the “sick man of Europe”, a stagnant economy beset by high debt, low growth, and political dysfunction. Indeed, Italy’s GDP per capita flatlined or even declined since 2000, and analysts pointed to “stagnation, high debt and low growth” as defining features of its economy. The country earned an unflattering reputation as a shrinking, aging nation surviving off past glory, with dismal productivity and scant innovation. However, the latest export triumph underscores how outdated those stereotypes have become. “Contrary to old stereotypes that describe Italy as [low in] productivity and innovation, the data suggest a very different reality,” notes a recent analysis by the Edison Foundation. Italy’s performance over the last decade reveals an economy far more dynamic than its critics assumed. Exports have been the clearest success story, growing robustly and outpacing all peer nations in the G7. In fact, Italian exports increased by an astounding 48% in the past ten years, nearly double the export growth of advanced rivals like France (+28%) or Germany (+27%). This surge has left former skeptics flat-footed: Italy is now the G7’s most export-growth‐driven economy, far outstripping Japan (+15%) or the UK (+12%) in export expansion over the decade. The message is clear and shows that the old narrative of Italian economic decline is being overturned by an export-led revival, as Italy’s manufacturers carve out an ever-larger slice of world trade.
A Historic Surge: From Seventh to Fourth in the World
By capturing 5% of total world exports, Italy has vaulted into the global top four exporters, surpassing heavyweights like France, South Korea, and Japan along the way. Just ten years ago, Italy was only the world’s seventh-largest exporter. Climbing to fourth place, behind only China, the United States, and Germany, is an exceptional jump in rank. It was first noted by the World Trade Organisation in 2024 that Italy’s export value had overtaken Japan’s, despite Japan’s workforce being three times larger than Italy’s. Now, the OECD’s latest figures confirm that as of the third quarter of 2025, Italy officially out-exported Japan on a seasonally-adjusted, US dollar basis. This outcome is remarkable not just for the statistical upset, but for what it says about Italy’s resilience. While many European peers saw their share of global exports erode in the last decade, France slipped to 7th place and even export champion Germany saw its world market share dip from 14% to 12.6%, Italy went the opposite direction. Italian exporters aggressively improved product quality and diversified markets, enabling Italy to gain ground even as others lost traction. The narrative of “Italy in decline” has been contradicted by hard trade data: in the external sector at least, Italy is punching well above its weight.
One striking aspect of this surge is Italy’s ability to compete globally without giant multinational firms or mass-volume output. Unlike countries such as Germany, the U.S., or Japan, which boast corporate titans and huge assembly industries, Italy’s export engine is powered by thousands of smaller and mid-sized firms. The country’s strength lies in a unique ecosystem of industrial districts and “pocket multinationals.” According to Edison Foundation research, Italy has around 26,000 small and medium exporters (50–1,000 employees each) concentrated in ~160 specialised industrial districts. These hyper-specialised clusters (from the machine-tool makers of Lombardy to the ceramic tile hubs of Emilia-Romagna) act as “invisible pillars” of Europe’s economy, supplying critical components to sectors like French luxury goods and German automotive manufacturing. In total, roughly 9,000 medium-large firms account for three-quarters of Italy’s manufacturing exports, showing how broad the base of exporters is. This model confers some key advantages. The tight-knit local clusters give Italian companies agility and secure supply chains, a resilience edge in turbulent times. It also fosters specialisation in high-value niches rather than reliance on a few dominant conglomerates.
Diversification: The Broadest Export Basket in Europe
The Office of Government Procurement (OGP) in Ireland publishes national thresholds for advertising and Italy’s export success is also built on remarkable diversification of products and markets. The Italian economy manages to “not put all its eggs in one basket” to an extent unmatched by most peers. Italy today exports the widest variety of products to the broadest range of destinations of any country. Unlike some exporters who depend heavily on one industry (for example, South Korea’s tech/electronics or Germany’s automotives), Italy’s top 100 export products account for only 40% of its export value, a far lower concentration than in France (50.5%) or Korea (67.6%). This means Italy’s economy is less vulnerable to downturns in any single sector, a key factor that helped it keep growing exports even amid global shocks. Italy sells everything from machinery and pharmaceuticals to fashion, furniture, food and wine. In fact, Italian firms are world leaders in a surprising array of niches. As of 2023, Italy was the world’s #1 exporter of 201 distinct products, from obvious Made-in-Italy staples to high-tech capital goods. Among Italy’s top export champions are luxury ceramics and textiles, high-end foods (like pasta and cheese), yachts and cruise ships, eyewear (sunglasses), and packaging machinery. This breadth underscores how Italian manufacturers moved up the value chain, excelling in specialised markets often too small or too custom for mega-corporations to dominate. Italy has effectively leveraged its cultural cachet in design, fashion, and food while also conquering industrial niches, building what one might call a “diversified industrial boutique” economy. This diversity helped Italy weather recent storms (from pandemic disruptions to trade wars) better than more narrowly focused competitors.
Key factors in Italy’s export boom include:
- Specialised Industrial Districts: Networks of SMEs (“multinazionali tascabili”) clustered in 160 local districts fuel Italian exports. These highly specialised small/medium firms collaborate and supply each other, creating agile manufacturing hubs. Their geographic proximity helps secure supply chains and fosters rapid innovation and quality improvements. This bottom-up industrial model underpins Italy’s export competitiveness even without corporate giants.
- Broad Product Mix: Italy exports an exceptionally wide range of goods. Its top export categories span machinery, vehicles, pharmaceuticals, fashion/apparel, food & wine, furniture, and luxury goods, among others. No single sector dominates: for example, the huge automotive sector that represents 10–15% of exports in Japan or Germany makes up only ~3% of Italy’s exports. This diversification insulates Italy, when one sector slumps (e.g. autos or electronics globally), Italian exporters pivot to strength in other areas.
- Quality and Niche Leadership: Italian firms have carved out leadership in many niches by competing on quality, design, and innovation rather than volume. Italy is the world’s top exporter for over 200 niche products, from luxury ceramic tiles and superyachts to espresso machines and packaging equipment, industries where it often holds a technological or brand edge. Upgrading product quality has been a deliberate strategy, helping Italy “hold its own” even against low-cost Chinese competition in certain fields.
- Modernisation via Policy Incentives: A crucial (and underappreciated) driver of Italy’s export renaissance has been policy-led industrial modernisation. In 2016, the government launched the “Industria 4.0” plan, a suite of generous tax incentives (e.g. hyper-amortisation of high-tech investments and R&D tax credits) to spur digital transformation in manufacturing. This policy proved highly effective: Italian companies invested massively in new machinery and automation, with business investment in machines jumping +59% by 2023 (to 7.3% of GDP). Italy’s capital investment rate has even surpassed Germany’s (6.6% of GDP), reflecting how quickly firms adopted cutting-edge equipment and processes. The result is a modernised industrial base. Italy’s exporting companies are now among the most technologically advanced in the world, thanks in part to Industry 4.0 upgrades. This improved productivity and innovation capacity has directly enhanced export competitiveness.
- Agile Mid-Sized Firms: Italy’s midsize manufacturers (50–500 employees) have emerged as unsung heroes of productivity. Many of these firms are family-run “hidden champions” that aggressively innovate. Notably, Italian mid-sized companies now register higher labor productivity per employee, about €16,000 more, than even their German Mittelstand counterparts. These firms often dominate niche markets globally. Their agility and technical prowess have allowed Italy to respond to global demand shifts faster, sustaining export growth where other nations faltered.
Record-Breaking Growth Among Peers
The payoff from these factors is evident in Italy’s trade statistics. Over the last decade, Italy’s export growth has outshone every other G7 economy, making it the most dynamic exporter of the group. Italian exports expanded ~48% in value (in current dollars) since 2015. This nearly doubles the export growth rate of France and Germany (both under 30%) and leaves Japan (+15%) and the UK (+12%) far behind. Even commodity-rich countries like Canada (+38%) and the United States (+34%) could not keep pace. Such growth is particularly striking given Italy’s lack of natural resources and its aging population. It suggests that productivity improvements, innovation, and savvy internationalisation drove the gains, rather than any demographic or resource windfall.
Zooming in on recent performance, Italy’s momentum has only accelerated. In the first nine months of 2025, Italian merchandise exports (by value in USD) jumped +6.6% year-on-year, roughly twice the export growth rate of Germany (+3.1%), France (+3.8%), or Spain (+3%) in the same period. The third quarter of 2025 was especially explosive: Italy’s quarterly export value was +13.3% higher than Q3 of the previous year. By contrast, export powerhouses like South Korea managed only about +6.5% and Japan’s exports barely grew (+1.4%) over that quarter. This divergence explains how Italy edged past Japan. Japan’s export machine has been sputtering recently, hampered by a slump in its vital auto industry, while Italy found new growth even in a slowing global economy. As a result, trade rankings shifted. In fact, OECD trade data for Q3 2025 show that Italy’s quarterly goods exports (~$190 billion) slightly exceeded Japan’s (~$184 billion), placing Italy 4th among G20 economies for exports during that quarter. The top three remain China, the US, and Germany, but Italy has firmly cemented itself next in line. Given the trajectory, Italy closed 2025 as the world’s No.4 exporter on an annual basis as well. Such performance, amid global trade headwinds, underscores the competitiveness and adaptability of Italian firms.
Policy and the Path Forward
Italy’s export renaissance did not happen by accident, targeted policy measures and business strategies over the past decade set the stage. The Industry 4.0 initiative of 2016 was particularly pivotal. By offering tax breaks for digitalisation and automation investments, it tackled one of Italy’s chronic weaknesses: low investment and lagging productivity. The outcome has been a much-needed modernisation of Italy’s production apparatus, bringing many factories into the era of advanced manufacturing. Government export promotion has also played a role. Italian trade commissioners and the Ministry of Foreign Affairs launched an “Export Pact” (Patto per l’Export) in 2020 and other programs to help SMEs market abroad and attend trade fairs, capitalising on the global appetite for Made in Italy goods. Meanwhile, Italy benefited from the eurozone recovery plan (NextGenerationEU), of which it was a top beneficiary, channeling some of those funds into infrastructure and innovation that indirectly support exports. All told, Italian policymakers and business associations made export competitiveness a priority, and it is paying dividends. Industry bodies such as Confindustria, alongside SME and artisan representatives including Confartigianato and CNA, have consistently pressed for policies supporting internationalisation, innovation incentives and reduced administrative burdens for exporters. Their combined advocacy helped keep export performance at the centre of Italy’s economic strategy.
Despite the positive trends, challenges loom on the horizon. One concern is the external trade environment, notably the threat of protectionism. Italy’s exporters have lately faced higher U.S. tariffs on certain goods (for instance, the Trump administration’s duties on European products, including Italian metals, autos, and foods). These tariffs raised costs and uncertainty. Italian Foreign Minister Antonio Tajani has warned that a stronger dollar or euro, combined with tariffs, can hurt Italy’s export momentum. The United States is a crucial market (Italy is currently the largest European exporter of goods to the U.S.), so trade tensions are being closely watched in Rome and Brussels. Confindustria, together with Confartigianato and CNA, has warned that extended U.S. protectionist policies could cut Italian exports by up to €17 billion per year, underscoring what is at stake not only for large manufacturers but also for Italy’s dense network of exporting SMEs and artisan firms.
However, Italy’s recent export triumph provides a buffer and a beacon. The trade surplus and strong export earnings help offset domestic weaknesses, supporting jobs and income. And the very fact that Italy confounded expectations in trade gives confidence that it can tackle other reforms. The government of Giorgia Meloni has cited the export boom as evidence that Italy can be a “first in class” economy rather than the last, if the right policies are pursued. To keep the momentum, Italy will need to continue boosting productivity, for example, by further digitising its many small firms, improving education and R&D, and cutting red tape that hampers business growth.
Outlook
Italy’s rise to become the world’s fourth-largest exporter is an emphatic reminder that no economy’s fate is set in stone. A country often dismissed as moribund has shown a capacity for renewal by leaning on its traditional strengths (craftsmanship, design, manufacturing know-how) while embracing modernisation and globalisation. The “dying museum” caricature of Italy is now obsolete, replaced by the image of a competitive exporter that can go head-to-head with larger industrial powers. In an era when global trade is in flux, Italy’s experience offers a counter-narrative: even in a mature, developed economy facing demographic and fiscal headwinds, strategic investment and export focus can ignite a renaissance. As Italy consolidates its new position, policymakers and business leaders are keen to prove that this success is sustainable. The next chapter will involve safeguarding these gains, through innovation, diversification, and diplomacy, so that Made in Italy continues to shine worldwide. For now, Italy’s exporters have earned their spot on the global podium, and the rest of the world is taking notice of this unlikely export powerhouse.
Background Reading and Additional Sources:
Italian exports are growing (despite tariffs) https://www.efanews.eu/item/56141-italian-exports-are-growing-despite-tariffs.html
Export Records for Italy in the First Half of 2024 https://www.invenium-legaltech.com/en/export-recors-for-italy-in-the-first-half-of-2024
“Les Echos”: Italy “dethrones Japan” and becomes the world’s fourth-largest exporter. https://www.agenzianova.com/en/news/Italy-overthrows-Japan-and-becomes-the-world%27s-fourth-largest-exporter
L’Italia spodesta il Giappone e diventa il quarto esportatore mondiale (Les Echos)
