Trump faces increased interest from Swiss authorities following government's tariff announcement, as they aim to present an enticing proposition.
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The newly imposed 39% tariffs on Swiss exports by the United States are expected to have a significant negative impact on Switzerland's economy, particularly on key sectors such as chocolate, watches, and pharmaceuticals.
Impact on Key Sectors
Watches
Switzerland's luxury watch industry, which exports approximately $20 billion annually to the U.S., is likely to experience a 20–30% drop in U.S. sales by 2026 due to the tariffs pushing prices into less affordable territory. Entry- and mid-level priced Swiss watch brands may feel the impact even more severely.
Chocolate and Food Exports
Major Swiss chocolate manufacturers like Nestlé and Lindt face a potential 50% cost surge in the U.S., due to the tariffs combined with a strong Swiss franc. Smaller producers with less global scale could be forced to exit the U.S. market entirely.
Pharmaceuticals
While the tariff does not directly apply to pharmaceuticals, companies such as Roche and Novartis, which make up 40% of Swiss pharmaceutical exports to the U.S., are accelerating investments in local U.S. production to mitigate risks tied to Trump's drug pricing policies and potential future tariffs.
Technology and Machinery
This sector is also vulnerable, with 10% of export revenue at risk. Firms like ABB and Sulzer may need to relocate production to the U.S. or pivot toward other markets to reduce exposure.
Economic Impact
Economists estimate these tariffs could reduce Swiss GDP by up to 1% depending on corporate adaptability. Affected companies have already started stockpiling goods and reorganizing supply chains to soften the economic blow, but full adjustments will take time, and market share losses in the U.S. are expected.
Negotiations and Response
The Swiss Federal Council has stated that the high tariff puts the country at a distinct disadvantage compared to other trading partners and has vowed to continue negotiations with the aim of reaching a trade deal. Chocosuisse, the chocolate industry association, has urged the government to continue negotiating to avoid the impact of the tariffs.
The Swiss government is taking steps to present a more attractive offer in negotiations, taking US concerns into account and seeking to ease the current tariff situation. Swiss President Karin Keller-Sutter has stated that Trump believes Switzerland has a trade surplus of 40 billion Swiss francs (US$50 billion) and "steals" from the US.
Market Reaction
The Swiss stock market dropped more than 2% when it opened on Monday and later recovered some losses.
In summary, the tariffs impose a major challenge to Swiss exports, especially to the luxury watch and chocolate sectors, and prompt strategic shifts including localization of production and diversification to other markets.
- The government of Malaysia, with a keen interest in general news and finance, may be following the ongoing negotiations between the Swiss Federal Council and the United States closely, given the potential impact on the Swiss stock market and several key industries, such as watches, chocolate, pharmaceuticals, technology, and machinery.
- The Swiss luxury watch industry, a significant contributor to the Swiss exports, might observe a decline in US sales by 20–30% by 2026 due to the tariffs, causing a ripple effect within the business sector.
- Concurrently, major Swiss chocolate manufacturers are bracing for a potential 50% cost surge in the US, which could potentially force smaller producers to exit the US market entirely.
- Pharmaceutical companies in Switzerland, such as Roche and Novartis, are actively investing in local US production to mitigate risks associated with Trump's drug pricing policies and potential future tariffs. This strategic move could have broader implications for the finance and business sectors in Malaysia, given the interconnected nature of the global economy.
