Switzerland failed to gain an advantage on tariffs due to its neutral stance
The Trump administration's imposition of a 39% tariff on Swiss imports has sparked significant geopolitical implications, straining the Swiss-US trade relationship and posing risks to key Swiss export sectors. This tariff, higher than those applied to other developed countries, targets critical Swiss industries such as watches, machinery, metals, food, and potentially pharmaceuticals.
The economic impact on Switzerland is profound. The tariff directly affects major Swiss export industries, jeopardizing approximately 100,000 jobs, mainly in watchmaking, machinery, metals, food, and potentially pharmaceuticals if tariffs extend there. Swiss businesses and the government face pressure to respond and seek ways to mitigate these effects, while Swiss exporters lose price competitiveness in a vital US market.
The US justifies the tariff based on Switzerland's large goods trade surplus with the US, aiming to correct perceived trade imbalances. This tariff is part of broader Trump administration trade policies meant to pressure countries with favorable trade balances against the US.
The unprecedented punitive tariff on a traditionally neutral and economically independent country like Switzerland signals a shift in geopolitical trade dynamics, increasing tensions and forcing Switzerland to navigate a complex renegotiation with Washington. The severity of the tariff may isolate Switzerland economically or push it towards diversifying trade partnerships beyond the US.
The tariff may lead US consumers and companies to seek alternatives from other countries with lower tariffs, potentially resulting in less preferred or lower-quality products entering the US market. This undercuts Swiss exports and reduces US product variety.
Swiss businesses have considered routing goods through nearby regions like Liechtenstein to avoid tariffs, but the Swiss government has discouraged such strategies. Liechtenstein also faces economic risks due to its close market integration with Switzerland.
The Trump administration hinted at even higher tariffs (up to 250%) on pharmaceutical products if Swiss drug prices remain high, creating further uncertainty. The Swiss government is engaged in ongoing discussions with Washington to negotiate tariff reductions or exemptions, but the current environment points to a more protectionist US trade stance and a tough bilateral relationship in the near term.
In summary, the 39% tariff is a significant disruption to Swiss-US trade with considerable job risks and economic consequences for Switzerland, alongside increasing political and economic tension. Ongoing negotiations will be crucial to determining whether the Swiss-US trade relationship can stabilize or will continue deteriorating under these tariffs.
This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. Switzerland, due to its smaller size, could only have made a difference as part of a larger bloc, such as the EU. Some parties in Switzerland are using the current situation as a chance to call for a more pro-EU political direction.
Politicians should recognize that the trade turmoil is not a one-time event, and dodging a bullet today does not guarantee escape from future problems. The Trump administration sees the situation with Switzerland as a test of strength in its full-on mercantilist economic policy. The urge to negotiate separately rather than collectively is a common response to trade disputes, even though it may not yield better results.
Lionel Laurent is a Bloomberg Opinion columnist, writing about the future of money and the future of Europe. Previously, Laurent was a reporter for Reuters and Forbes. Swiss President Karin Keller-Sutter had claimed some credit for Trump's initial tariff climb-down in April, but her influence seems to have waned. The Swiss stock market has recovered early losses, viewing the 39% tariff as a prelude to more concessions and a potential handshake.
The Trump administration views Switzerland as a currency manipulator with a $38 billion trade surplus in goods, including gold bullion refining. The Kiel Institute has proposed a coalition of countries representing 50% of goods exports to the US, including the EU, Canada, and South Korea, to counter Trump's tariffs. Switzerland is offering more concessions to the US administration, potentially including buying more US energy. For Swiss drugmakers, such as Novartis AG, a possible 25% pharmaceutical tariff is a concern if no deal is reached.
The new tariff could cost Switzerland 1% of its GDP. Switzerland has had recent crises, including the collapse of Credit Suisse in 2023. The proposed retaliation would be concentrated and powerful enough to potentially force the US to reconsider its tariff policies.
- The tariff's consequences go beyond trade, as it transcends global finance by incentivizing Swiss exporters to seek alternatives, potentially reducing product variety in the US market.
- In the realm of politics, the tariff strains the Swiss-US relationship, forcing Switzerland to navigate complex renegotiations with Washington, and pushing some Swiss parties to advocate for a more pro-EU political direction.
