Why Switzerland faces a unique struggle

Switzerland faces what some have described as a “triple blow” of economic problems, as 39 % of the customs tariff enters the goods to the United States.

Punitive duties were taken in the early hours of Thursday morning, after a Swiss delegation led by President Washington, DC, left a day ago without securing a trade deal at the last minute.

Announcing the 39 % tariff rate, one of the highest in the latest confrontation of US President Donald Trump, came to a a surprise To the European country as a commercial agreement, it was imminent.

However, Trump told CNBC on Tuesday that Swiss President Karen Keeler Street “does not want to listen” to his concerns about the US trade deficit with Switzerland. After announcing the rate of tariffs by 39 %, the Swiss government He said Switzerland maintained a “very constructive position from the beginning” during “intense” talks.

The United States recorded a commercial deficit of $ 38.3 billion with Switzerland at the calculation of goods, and a surplus of $ 29.7 billion in the world of services last year, according to what he said USA’s commercial actor office.

The Federal Council in Switzerland set an extraordinary meeting on Thursday afternoon, after which it is expected to make a statement on the American definitions.

Swiss stocks rose in a trade Thursday morning, recovering from A sale in the previous session. By 11 am in London (6 am EST), Swiss market index It was 1.2 % higher, with investment apparently ignoring the effect of duties.

“Switzerland is in a difficult place but not without options,” Torston Sotter, head of Swiss stock research at Kepler Cheuvreux, said in the Thursday note to customers.

He said that Swiss officials can file a complaint from the World Trade Organization against American definitions or to place reprisal measures – such as restricting access to their American companies – in their place. But he believes that a “calm diplomatic batch” is probably the next step by the Swiss authorities.

“Switzerland may make targeted concessions – about the pricing of medicines, digital tax, or defense deals – to reopen the talks,” Souter said. “It is a process but may require uncomfortable concessions. At the same time, Swiss multinationals can pressure in the United States, while emphasizing job losses and investment relations. While short in solid power, legal clarity in Switzerland, global reputation, and elite exporters still give calm influence.”

Swiss inflation was also at low levels, even The negativity has been turned earlier this year. In July, the consumer price index came 0.2 % compared to the same month in the previous year.

But as long as pharmaceutical products – which are major Swiss exports – are not affected by definitions, their impact on economic growth may be limited.

“We estimate that the current tariff rate of 39 %, but with exemptions for pharmaceutical products, it will reduce the gross domestic product by about 0.6 % in the medium term. While this is important, it is not disastrous, but only about three months of economic growth,” he said.

However, Trump also told CNBC in an interview on Tuesday that a sector tariff for drugs It can reach 250 % During the next 18 months.

American duties on drug imports will be a major blow to Switzerland, a major center for the global pharmaceutical industry. In 2023The life science sector contributed 38.5 % of Swiss exports.

PretTejohn said that the duties of the sector are “possible” to take the total effect of American definitions on GDP in Switzerland to more than 1 % and possibly 2 %.

“Varma is the most important export of Switzerland,” Saghir of Kibler Cheyviro said in a Monday note. “Here, Switzerland is effective by adopting American drugs, but it must be taken carefully – one mistake can lead to a 39 % devastating tariff in its most valuable sector.”

Beyond Trump’s tariff, and demand for Swiss franc It also adds to the economic and diplomatic problems in Switzerland.

Since the beginning of the year, the currency – which is usually seen as a safe origin has gained in times of uncertainty or market turmoil – has gained about 11 % against the US dollar. that it Value height It was weighing inflation, which prompted the Swiss National Bank to Reducing the main interest rate to 0 % In June.

Swiss exporters now said a “triple blow” of problems.

A sharp tariff … [would] He explained, “Come to the top of the pair of the USD/CHF currency, and competitive defects compared to neighboring countries.”

The European Union recently He got a deal with the Trump administration This will witness a 15 % tariff imposed on the goods that export the mass to the United States – at a much lower rate than Switzerland.

Kamal Sharma, a G10 FX strategic expert at Bank of America, told CNBC on Wednesday that Trump’s commercial policies put the Swiss National Bank in a “very difficult situation”.

“I think the big issue is that from the perspective of prices, the market has now started more interested, because negative [rates] “There is something on the horizon always, there is some concern that if the American commercial deal remains the same, then this means that it will press SNB to make more measures,” he said.

Sharma said that the previous negative rates did little to increase inflation and weaken currencies, and it is unlikely to weaken a tariff.

The strategy added: “Whenever the direct response that SNB can say is to say, see, we need to compensate for this by engineering some of the currency decrease, and what it does is that it re -interfering with play. So the intervention now is more likely than before.”

But this is not an easy step for Swiss policy makers. SNB intervention in the foreign exchange market led to Switzerland is classified as currency maneuvers During the first period of Trump, and earlier this year, the country was added to a “monitoring list” of commercial partners “that deserves close interest currency and economic policies.”

Trump’s tariff policy takes into account, that is, “currency manipulation and commercial barriers.” Swiss officials have denied accusations of intentionally reducing the value of the Swiss franc against Greenback.

However, Sharma from Boa said SNB is likely to plow with the intervention of the currency, even if “may increase the anger of the American administration.”

In some respects, [they’ve] They had nothing more than that … they should start thinking about the Swiss industry. “