MILAN (Reuters) – Italy’s fashion industry increased revenues by just 0.2% in the first quarter of 2019, held back by trade tensions between the United States and China, the national sector body said on Monday.

The industry, whose annual revenues account for around 4 percent of Italy’s gross domestic output, has grown by 3% on average every year in the last decade, said Carlo Capasa, chairman Italy’s National Fashion Chamber (CNMI).

“We hope to recover in the second part of the year,” Capasa told reporters at a press conference to present Milan’s Men Fashion Week, which will take place on June 14-17.

Turnover in the Italian fashion industry rose 2.8% to 66.6 billion euros ($74 billion) in 2018, according to CNMI estimates. Including textiles, leather and shoes, sales reached 89.3 billion euros, up 2.3% year on year. Exports accounted for over 75% of sales.

Capasa urged the Italian government not to raise the sales tax on fashion goods.

Speculation the government could hike VAT on targeted products, including luxury items, has increased amid concerns Rome could struggle to manage deteriorating public finances in the second half of the year.

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