During an avalanche of bad news, Switzerland was hit with a historic bombshell. United States, delivering a fierce blow to the tendering country’s economy with an astonishing 39% tariff charged on its exports. The decision comes after a tense 30-minute conversation between Donald Trump and Karin Keller-Sutter, Switzerland’s finance minister and current president. Switzerland thought the tariff would be a modest 10% after three months of talks. Instead, officials and economists are still ducking and dodging, looking for their next excuse after the unexpected increase.
This abrupt and unintended increase in tariffs would be a major blow to Switzerland’s highly export-oriented economy. Critical Swiss sectors such as luxury watches, jewellery, chocolate, machinery and pharmaceuticals would be hit extremely hard. Exports to the US make up approximately one-sixth of Switzerland’s total foreign sales. This serves to underscore why the new tariff rate should be of grave concern—not just to businesses, but to workers as well.
Hans Gersbach, an economist at ETH Zürich, was alarmed by what he called a “cascading economic fallout.” He kept the pressure on by warning that these high tariffs would cause a recession in his country, putting at risk some 7,000 jobs in Swiss industries. It’s fair to say that the call was not a success,” admitted one government source, speaking to the mood among Swiss officials about the outcome of the discussions.
Switzerland has the distinction of having some of the steepest tariffs levied against them by the US. Only Laos, Myanmar and Syria impose higher duties on themselves. On Monday, the headline Swiss stock market index opened 1.8% down. This decline is indicative of investor concerns over what the wider impacts of the latest trade move might be.
Guy Parmelin, Switzerland’s business minister, has called for clarity on Trump’s rationale behind the decision. He stated, “We need to fully understand what happened, why the US president made this decision. Once we have that on the table, we can decide how to proceed.” His comments underscore the seriousness with which Swiss officials intend to act to engage their US counterparts.
In fact, the US trade deficit with Switzerland last year reached Sfr38.5bn. This underlines how key the bilateral trade relationship is for each country. Industry associations are predicting that such a tariff rate would trigger the loss of tens of thousands of jobs. In turn, Swiss leaders are making moves to prepare for possible continued negotiations. Both Keller-Sutter and Parmelin are willing to come to Washington to negotiate if need be.
Switzerland could be looking at ways to minimize the economic fallout from tariffs. One possible answer is to support higher imports of US liquefied natural gas. The other is to discuss encouraging Swiss companies to invest even more in the US market.
“There was not a good outcome for Switzerland. But there was not a quarrel. Trump made it clear from the very beginning that he had a completely different point of view, that 10% tariffs were not enough,” – a government source.
This rash tariff increase will have very bad consequences. It will cut into Swiss exports, and more broadly, it risks shaking the core of the country’s famed economic stability. We know that the officials are hard at work to get more information and reach a resolution. The fates of Swiss-American trade relations now lie in a fragile balance.