Each month, this space will offer a view on how international events are impacting the Italian economic fabric. The series will focus not just on the operational impact of geopolitical events, but on how they change the strategic outlook for Italian firms and their partners. Each issue will aim to shed light on key opportunities (and risks) for Italian economic actors in an increasingly contested world order. As strategic competition gains traction, businesses that observe and learn to be comfortable in a fast-moving context will thrive. This space aims to help the observation leg of this journey. Occasionally, articles will include reflections stemming from conversations with public and private enterprises and academia. How is the demand for political analysis evolving in Italy? What are the key geographic and industrial areas of interest? What are the most pressing concerns? “Italy on Board” seeks to answer
August was a busy month for China’s regulatory power. On August 5, the Ministry of Commerce tightened export controls on drone-related dual-use items and key hardware components destined for the United States, subjecting critical technologies to rigorous case-by-case reviews and stripping license facilitation measures. Ten days later, on August 15, Beijing’s landmark Ecological and Environmental Code officially took effect; structured in over 1,200 articles, it consolidates more than 30 environmental laws into a unified framework and introduces direct legal liability for downstream industrial buyers who use unauthorized chemical substances. Finally, on August 21, the Central Cyberspace Affairs Commission issued its 2026–2030 Action Plan for Cybersecurity and Informatization Enterprises. The plan aims to solidify state oversight over digital ecosystems, chiefly AI and data security regulations.
This means a new compliance premium for Italian companies doing business in or through China. The new drone restrictions are formally directed at exports to the United States, so their direct impact on Italy is limited, but they could still create bottlenecks for Italian groups’ supply chains in any sector ranging from aerospace to advanced manufacturing. The environmental reforms are more directly relevant: companies manufacturing or sourcing in China will need much greater visibility over the chemical substances used by suppliers, as responsibilities increasingly extend downstream and non-compliance can trigger substantial penalties. At the same time, tighter governance of data and AI will increase the compliance burden for companies transferring industrial or customer data out of China.
The Chinese Environmental Code’s approach bears a striking resemblance to the EU’s Corporate Sustainability Due Diligence Directive (CSDDD). Italian lobbies have spent years warning that European due-diligence requirements could become costly and burdensome, particularly because of the need to map suppliers and document compliance. Many may not yet appreciate that operating in China is beginning to demand a comparable level of control, albeit through a different regulatory model, and with less predictable enforcement. Italian firms will be asked to track who their Chinese suppliers are, what components or substances they use, where their data moves, and where products end up.
Washington is likewise making broader use of sanctions as instruments of economic pressure and foreign policy. On August 24, Treasury launched Operation Economic Outcast against Iran, widening the scope for secondary sanctions and allowing OFAC to target foreign actors involved in five additional sectors of the Iranian economy: digital assets, technology, gold, aviation and shipping. Treasury also made clear that foreign governments and companies involved in sanctioned activity could face exclusion from the U.S. financial system. Earlier in the month, the Senate passed the Lindsey O. Graham Sanctioning Russia and Iran Act, pushing similar measures against any transaction linked with Russia. Washington has also continued to broaden its use of Section 232 national security powers. New measures introduced in August cover polysilicon and drones, with European drones and components eligible for a 15% tariff only where substantially all hardware and software originate in the EU or the United States.
For Italian companies, the main effect is that U.S. regulatory exposure is no longer confined to the U.S. market itself. Companies with links to Iran can face secondary sanctions even when a transaction takes place outside the United States and is lawful under European rules, while the Russia legislation, if enacted, could create problems for firms exposed to countries that remain major buyers of Russian energy. The expansion of Section 232 creates a related challenge. Italian exporters may increasingly need to prove not only where a final product was made, but where its components and software come from, to qualify for the 15% treatment.
Economic Lawfare has visibly become a routine instrument of foreign policy, and it comes with no settled rulebook. There are no clear boundaries or certainty over how measures will be interpreted and enforced. Both Washington and Beijing are now using regulatory power more assertively and with fewer concerns about the commercial friction it may create. China has pivoted more significantly. For years, Beijing was careful not to let regulation undermine its attractiveness to foreign investors. It is now increasingly willing not only to tighten rules at home, but also to make access to Chinese markets and outputs conditional on choices made elsewhere. In doing so, it is adopting a form of extraterritorial regulatory power long associated with the EU. Once boasting the so-called Brussels Effect, Europe now finds itself increasingly squeezed between two larger powers using similar tools in a more deliberate and calculated way.
An example of this squeeze is already evident in some of the regulatory measures listed above. An Italian aerospace supplier using Chinese sensors to manufacture components for an American defense contractor must now prove to Beijing that its tech isn’t US-bound, while simultaneously proving to Washington that its final product contains no critical Chinese inputs.
Italian companies have to navigate three major regulatory spheres whether they choose to or not. EU rules remain demanding, but they are generally developed through relatively transparent processes and within a comparatively stable legal framework. U.S. and Chinese measures can move faster and leave more room for administrative discretion.
Regulatory monitoring, once a nice-to-have or an ad hoc exercise when completing a specific transaction, is a new necessity. Done well, it can also become an advantage, helping companies identify openings created by new rules and anticipate competitors.