Switzerland in shock at having to endure 39% tariffs
Switzerland's national holiday, August 1st, with its traditional barbecues and fireworks, turned out to be the worst nightmare for citizens of the Swiss Confederation, who woke up yesterday to 39% tariffs on their goods sold to the US, the highest in Europe and even higher than the 31% announced on April's "Liberation Day."
There's not much desire to talk in the country of the mountains. In the corridors of the offices at the University of Lugano, academics confess to being in a state of shock. The first thing they think of is that Donald Trump wanted to hit the powerful Swiss pharmaceutical industry. The president has repeatedly reaffirmed the concept that medicines must be produced in the United States. In this sense, the high tariffs may be a pressure measure to force Swiss companies to lower their prices and thus reduce the healthcare costs for the US treasury.
At the University of Freiburg, however, some believe the White House's aggressiveness is motivated more by the fact that Swiss banks, following the collapse of Credit Suisse, have stopped buying US Treasury securities and are shifting toward Asian bonds. This change in strategy is making US debt more expensive and is causing discontent in Washington. The White House, for its part, justifies its drastic tariff decision with the mantra of "national security reasons."
Read also Trump's tariff onslaught on Switzerland hits Rolex distributors and pharmaceutical companies The Vanguard
Meanwhile, the icons of Swiss-made stocks had a day that was anything but festive yesterday on the markets. The watch sector, which has been in a slump for months, deepened its crisis. Watches of Switzerland Group Plc, the UK-listed distributor of Rolex, lost nearly 7% on the stock market. Richemont and Swatch also closed in the red.
The feeling, some Swiss academics comment quietly, is that the Berne government hasn't negotiated well. We're facing a political defeat, as well as a financial one. "We couldn't reach an agreement on how best to reduce that trade deficit," Jamieson Greer, the U.S. Trade Representative, told Bloomberg. "They ship huge quantities of pharmaceuticals to our country. We want to manufacture them in our country." Roche and Novartis had pledged in recent months to invest more than $70 billion in the United States. Apparently, it wasn't enough.
Read also The tariffs are even higher than those announced in April, and the watch sector is falling on the stock market.With a trade deficit in favor of Switzerland of €43 billion, the US market is key for the small Alpine country of 9 million inhabitants. In 2024, it accounted for 18.6% of its merchandise exports. These are primarily pharmaceutical products—which account for 60% of all Swiss exports to the country—parts from the technological industry (machinery, electrical equipment, and metals) representing 20%, and watches (8%).
“Switzerland is used to storms,” said President Karin Keller-Sutter, who until a few days ago had admitted that everything was “in Trump’s hands.” The government assures that it will continue negotiating. But the mechanical engineering industry association Swissmem declared that “everyone’s prosperity is at risk.” The tariffs “threaten Switzerland with enormous economic damage,” declared Interpharma, the country’s association of pharmaceutical research companies. Economic research centers believe that up to three-tenths of a percentage point of GDP could be lost. What a way to spoil a party.
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