The Ambassador in Italy (Phillips) to the Secretary of State
[Received May 19—3:34 p.m.]
197. For the Secretary and Under Secretary. The Italian memorandum referred to in your 38, May 17, 6 p.m.23 illustrates the temper of the Italian Government vis-à-vis what they regard as our unfriendly attitude. Their complaints include first of all our continued refusal to recognize their empire status and the hostility of our press and they are still irritated by the President’s message to Mussolini.24
While I thoroughly appreciate the Department’s difficulties and the responsibilities of the Treasury under Section 303 of the Tariff Act it seems to me of great importance that we reach a friendly settlement and avoid the consequences of a possible cessation of trade between the two countries which would carry with it the loss of a profitable market for us. Any such result would play directly into the hands of Germany which more and more is dominating the Italian markets. Unfortunately for the present at least the commercial life of Italy is controlled by a political group who regard international trade as of less importance than political prestige. The only hope in the situation, as I see it, is to prevent Italy from falling completely within the German economic system and this can only be done by preserving and encouraging Italy’s trade with the United States and with the other great democracies. Italy in this way while preserving her political alliance with Germany would nevertheless retain a degree of independence in her economic life which may be of extreme importance in the future.
I shall not take any steps with the Foreign Office without instructions but I should like to be able to explain to Ciano25 that Section 303 of the Tariff Act is not directed exclusively against Italy and Germany as he seems to think but rather that the Treasury desires to be reassured that Section 303 of the Tariff Act is not to simulate [sic] the situation.