Switzerland finds itself in an unfortunate position today. It might now have to deal with a nasty surprise of a 39% duty slapped on all goods exported to the US market. This coming development is a remarkable sign of the times for U.S. trade policy, where under President Donald Trump, the trade winds have undeniably shifted. Swiss officials are understandably now in a panic to find some solution before the looming August 7 deadline.
And the U.S. Trade Representative Jamieson Greer has raised his skepticism regarding future negotiating prospects. Beyond that, he doesn’t think it’s probable that tariffs will go down any time soon. Greer explains that “these tariff rates are virtually cast in stone. That’s a signal that the U.S. government is indeed playing hard ball while trying to deftly avoid a global trade war.
Swiss authorities are considering ways to change their proposal in order to meet the concerns raised by the U.S., but time is quickly running out. Guy Parmelin, a member of the Swiss federal council, head of the Department of Economic Affairs, Education, and Research. He agreed that they could increase their counteroffer, but raised red flags about their ability to make a successful amendment in time.
The consequences of the proposed tariffs are just as dire. Jan Atteslander of Economiesuisse gave an equally dire warning about the high rate’s cost to a majority of companies. He thinks the value of a trade deal would be greater to both sides than just stopping all trade would be. As a result, Swiss businesses will be hurt from an average 39% tariff. This would impact at least 10% of Switzerland’s GDP and increase the likelihood of entering a recession.
So tensions between Switzerland and the U.S. ratcheted up last Thursday. Things got spicy following a nasty telephone conversation between Swiss President Karin Keller-Sutter and President Trump. Though Swiss insiders have denied allegations that the meeting was contentious, the damage has already been done in global capital markets. The Swiss All Share Index dropped by 1.5% immediately after the tariff announcement. At the same time, blue-chip SMI index opened down roughly 1.2% to start Monday’s market.
Several leading Swiss firms, including Novartis and Nestlé, suffered significant drops in market capital. Sika, the Swiss chemicals firm, saw its shares fall by 2.1%. In contrast, stocks of luxury goods heavyweights Richemont and Roche were trading around 1.5% lower. Ongoing uncertainty regarding U.S. trade policies is hurting Swiss businesses. This increasingly precarious position calls into question their capacity to shift and thrive beyond an uncertain future.
Switzerland has a long history of focusing on diversification in its export markets, having been remarkably successful in that effort around the world. U.S. market is one unmatched, and irreplaceable, experts all of whom the on spoken market. It has overall been hugely important to ensure the health of the Swiss economy.
As the deadline approaches, Swiss officials are under pressure to finalize any potential agreement that could mitigate the impact of these tariffs. While the hope of ever getting a trade deal is never fully extinguished, the current political climate makes those prospects look dim indeed.
“It seems that the trade negotiations with the U.S. eventually boils down to what Donald Trump prefers.” – Mandruzzato