Executive Summary
- The United States, under President Trump, implemented 39% tariffs on Swiss exports, effective August 1, which are the highest imposed on any European nation and affect 17% of all Swiss exports to the US.
- The tariffs are causing economic contraction and anticipated job losses in Switzerland, particularly in the medical technology sector, with companies unable to absorb the costs, leading to higher prices for US patients and potential cessation of exports.
- Switzerland has chosen not to retaliate, instead focusing on diversifying its trade relationships by securing new deals with India and Mercosur, upgrading its agreement with China, and maintaining free trade with the EU.
The Story So Far
- The US, under President Trump, has imposed 39% tariffs on Swiss goods, the highest for any European nation, impacting 17% of Swiss exports. This move has caused significant concern among Swiss leaders, as Switzerland is a highly competitive, innovative economy and a substantial US investor, yet its non-EU status has prevented it from negotiating lower tariff rates similar to those secured by the UK and the EU.
Why This Matters
- The steep 39% tariffs imposed by the US are significantly impacting Switzerland’s economy, leading to anticipated job losses and potential cessation of exports by some medical technology companies, while simultaneously driving up costs for critical medical devices for US patients and taxpayers. In response, Switzerland is strategically diversifying its global trade relationships, a move that could fundamentally alter its long-standing business ties with the US and shift its economic focus.
Who Thinks What?
- Swiss business leaders and government officials consider the 39% tariffs imposed by President Trump unjustified, anticipating economic contraction, job losses, and increased costs for US patients, while responding by diversifying trade relationships rather than retaliating.
- President Trump’s administration implemented 39% tariffs on Swiss goods, representing the highest rate imposed on any European nation and a punitive measure that stands in contrast to lower rates secured by other US allies.
Switzerland is facing significant economic pressure following the implementation of 39% tariffs by the United States under President Trump, a move that has sparked concern among Swiss business leaders and government officials. These tariffs, which took effect on August 1, are the highest imposed on any European nation and the fourth-highest globally, impacting approximately 17% of all Swiss exports to the US.
Tariff Impact and Comparisons
The punitive tariffs on Swiss goods stand in stark contrast to the rates secured by other US allies; the United Kingdom negotiated a 10% tariff, while the European Union settled for 15%. Switzerland, which is not part of the EU, has been unable to secure a similar reduction, despite its efforts to renegotiate with Washington.
Swiss business leaders have expressed shock and dismay over the tariffs, describing them as unjustified given Switzerland’s economic profile. The nation is consistently ranked among the world’s most competitive and innovative economies and is a substantial investor in the US, with Swiss companies reportedly creating 400,000 jobs in the country.
Economic Fallout for Switzerland
The tariffs are already contributing to a contraction in Switzerland’s economic growth, with job losses anticipated in key industries. While pharmaceuticals, a major Swiss export to the US, are not currently subject to the 39% tariff, President Trump has recently threatened a 100% tariff on imported medicines, which would represent another severe blow to the Swiss economy.
The medical technology sector, known for its precision mechanics rooted in the watchmaking industry, is particularly vulnerable. Adrian Hunn, managing director of Swiss Medtech, highlighted the integrated “ecosystem” of production in Switzerland, exemplified by companies like MPS (micro precision systems) in Biel. MPS produces highly specialized medical instruments, from aortic valve replacements to surgical drills, which are crucial for an aging population like that in the US.
Challenges to Relocation and Cost Implications
Gilles Robert, CEO of MPS, noted that relocating the highly integrated production process of these precision instruments to the US would be “extremely challenging if not impossible,” citing the difficulty of finding the necessary specialized skills. He also stated that Swiss companies cannot absorb the 39% tariffs due to already thin margins.
Consequently, medical devices are expected to become more expensive for US patients. Adrian Hunn added that US taxpayers would likely bear the burden, as many healthcare costs are funded by public reimbursement programs. There is also concern that some Swiss companies producing unique, high-precision medical devices may cease exporting to the US altogether.
Switzerland’s Strategic Response
In response to the US tariffs, the Swiss government has opted against retaliation. Instead, Switzerland is actively diversifying its trade relationships. A trade deal with India, a rapidly growing economy, came into effect on October 1. An agreement with the South American trade bloc Mercosur has also been concluded, and Switzerland’s existing trade deal with China is being upgraded. Furthermore, free trade with the EU, which accounts for 50% of all Swiss exports, remains intact.
While the US tariffs are causing immediate economic damage, Swiss business leaders express a quiet confidence in the nation’s resilience. However, the long-term impact on the traditionally strong business relations between the two countries is a significant concern, with a palpable sense of disappointment among Swiss entrepreneurs who once viewed the US as a free-market counterpart.
