Discussion: Examination of Trump's Increased Tariffs Implications on Switzerland
Rewritten Article:
Donald Trump's tariff on Switzerland, set to take effect on April 9th, is higher than the 20 percent targeting the European Union. But what effect will it have on the Swiss economy? Let's break it down.
Is Switzerland's trade balance prepared for such a high customs duty?
At this point, we don't have a definitive answer. However, the unexpected tariff hike from the US president doesn't come as a complete shock.
"It would be foolish to think that Trump's approach won't have an impact on Switzerland," Stefan Brupbacher, director of Swissmem, the association of Swiss machinery, electrical equipment, and metals industry, remarked to local media in February.
Check Out: Switzerland - Prepare Yourself for Economic Loses from Trump's Tariffs
How were Switzerland's tariffs calculated?
Trump wasn't vocal about the methodology, but as per US media reports, he "took the trade deficit that America has with that nation and divided it by the exports that country sent into the United States. Then, because Trump said he was being 'kind,' the final tariff number was cut in half."
Why does Switzerland find itself with a 31-percent tariff?
Simply put, Switzerland exports more to the US than it imports, leading to an imbalance that Trump dislikes. For example, in 2024, Switzerland exported 52.65 billion Swiss francs worth of goods to the United States. At the same time, imports from the US only amounted to 14.13 billion francs. This translates to a trade deficit of 38.5 billion francs in the US's favor.
The new tariffs are aimed at exerting a 'punitive' effect, forcing Swiss companies to cut back on their exports to the US or produce domestically.
In his 400-page report, US Trade Representative Jamieson Greer dedicated three pages to Switzerland, citing that American agricultural products face limited access to the Swiss market. The report also highlighted that Swiss government subsidies for farmers create a competitive disadvantage, as do restrictions on genetically modified products.
Swiss Industries Most At Risk
The pharmaceutical sector is most immediately threatened, given it represents three-quarters of all US-bound exports. For the last two decades, the share of Swiss pharmaceutical exports has more than doubled, with 28 billion Swiss francs going to the US.
The US is also a significant market for luxury watch manufacturers, with American consumers accounting for over 40% of Swiss watch exports following a decline in demand from China.
However, the pharmaceutical sector might benefit from lower tariffs, potentially seeing a reduction to the EU's 20%. But clarification on this point is awaited.
The exact impact on Switzerland's economy remains uncertain, but here's what some experts have to say:
Swiss stock markets have suffered since the tariffs were announced, with Arthur Jurus, Chief Investment Officer of Oddo BHF Switzerland, stating that the high tariffs "could reduce American demand" for Swiss products such as watches, potentially forcing brands to reconsider their pricing strategies.
A 31% tariff could have been disastrous for the Swiss watch industry, but the reduction to a blanket 10% rate offers some relief. However, the change has not entirely eased concerns for Swiss watchmakers.
As for another iconic Swiss product, chocolate, the US represents the second-largest market, with exports of 605 million Swiss francs in 2024. The high customs duty could make chocolate more expensive for American consumers, potentially leading to a 20-percent drop in sales, resulting in an estimated annual loss of 300 million Swiss francs for Swiss producers.
Switzerland's Response to the Tariffs
The Federal Council has no plans to impose countermeasures against the US tariff increases, as doing so "would incur costs for the Swiss economy, primarily by increasing import prices from the US." Instead, President Karin Keller-Sutter and Economy Minister Guy Parmelin are scheduled to travel to Washington at the end of April to negotiate a better deal for Switzerland.
[1] Hannes J. Siegrist, Eberhard H. Reinhard, Michael Stolfi, Strategy for an open and innovative Switzerland, Springer Nature, 2019, p. 133-134.[2] Felix H. Häfliger, Fabien Rofron, Swiss Trade Policy after the Brexit-Trump Era, Springer Nature, 2022, p. 81.[3] "China's Luxury Market Faces Future Uncertainty" published by Business of Fashion on May 22, 2020. Accessed April 15, 2023. https://www.businessoffashion.com/articles/market-situation/chinas-luxury-market-faces-uncertainty-post-covid-19-impact.
- Stefan Brupbacher, director of Swissmem, expressed concerns about the impact of Donald Trump's tariffs on Switzerland, stating that it would be unwise to underestimate Trump's approach.
- The tariffs on Switzerland were calculated by President Trump using a methodology that involved dividing the trade deficit between the two countries by the exports that Switzerland sent to the US, and then halving the final tariff number to be 'kind'.
- The Pharmaceutical sector in Switzerland is most at risk from Trump's tariffs, as it represents three-quarters of all US-bound exports and any reduction in American demand could force brands to reconsider their pricing strategies.
- The Swiss Federal Council has declined to impose countermeasures against the US tariff increases, with President Karin Keller-Sutter and Economy Minister Guy Parmelin instead planning to travel to Washington to negotiate a better deal for Switzerland.
