Switzerland slashes GDP forecast as Trump’s tariffs weigh on economy

The Swiss government on Thursday lowered its 2026 economic forecast for the country, citing punitive tariffs imposed by the Trump administration as a “heavy burden” on its industries.

Officials maintained their forecast for the Swiss economy to grow by 1.3% this year, but noted that this level of economic growth was “well below average” for the country. Next year, they now expect GDP growth to slow to 0.9%, down from the previous 2026 forecast of 1.2%.

“The rise in US tariffs has further uncertain the outlook for the Swiss economy,” officials said in a press release on Thursday.

Switzerland’s economy is based on exports, and the United States was the top foreign destination for its goods in 2024. Back in August, Switzerland was subjected to customs duties of 39%. on goods sent to the United States after the Swiss delegation failed to secure a deal with US officials – one of the highest rates Country-specific rates imposed by the Trump administration.

The country’s largest exports include watches, medicines and precious metals, but the country is also famous for its industry Luxury goods, chocolates and skin care products. Branded and patented pharmaceutical products are Newly subject to 100% tariffs upon entry into the United States, unless its manufacturers have or are building production facilities in America.

Swiss officials said in the update issued on Thursday that under current trade conditions, global demand for Swiss goods and services is expected to rise “only modestly” in the coming quarters.

“The current trade policy environment presents particular challenges for Switzerland,” they said. “Additional tariffs place a heavy burden on affected sectors and export-oriented companies, with significant ripple effects expected across the wider economy. Furthermore, continued uncertainty is also dampening economic activity.”

The government also warned that most of America’s other trading partners received lower tariff rates, putting Swiss exporters at a competitive disadvantage in the US market. They said that the White House’s trade policy had a major impact on the future course of the Swiss economy.

“If Switzerland reaches an agreement with the United States or if it eases international trade policy, a more positive development is expected,” they said. “In general, however, downside risks currently dominate.”

Aside from Trump’s tariffs, the demand for… Swiss franc This also adds to the economic and diplomatic woes facing Switzerland, where the currency – typically seen as a safe-haven asset in times of wider volatility – has risen more than 12% this year amid continuing uncertainty. The stronger franc has created headwinds for the country’s central bank by putting downward pressure on prices as policymakers struggle to avoid sluggish inflation and negative interest rates.

Officials said Thursday Swiss franc He was continuing to play a role in Switzerland’s economic challenges – and warned that the franc could strengthen further.

“A deterioration in the international environment cannot be ruled out,” they said, noting continued risks related to the market correction, global sovereign debt and the geopolitical landscape.

“If any of these risks materialize, further upward pressure on the Swiss franc is expected,” they said.

Melanie Debono, chief European economist at Pantheon Macroeconomics, said on Thursday that the new forecasts from the Swiss government were in line with her own.

“Goods exports fall, as monthly nominal goods trade figures suggest, coupled with lower investment – ​​in light of growing uncertainty and despite… [Swiss National Bank] “The interest rate cuts – which will ultimately lower the interest rates faced by companies – mean we expect the Swiss economy to enter a recession in the second half of this year. We believe Swiss GDP will decline by 0.2% quarter-to-quarter in both the third and fourth quarters,” she told CNBC via email.