The European market has responded with some instability and specific reactions to the new round of American tariffs. Countries like Switzerland, for example, were caught off guard by a 39% tariff, which had an immediate impact on highly strategic sectors, such as watches and pharmaceuticals. Experts believe this has raised concerns due to its long-term impact on the country.
Swiss stocks hit by US tariffs
European shares closed higher on Monday, rebounding from six-week lows as a surge in banking stocks offset a decline in Swiss shares following a hefty 39% U.S. tariff on Swiss goods. The pan-European STOXX 600 index .STOXX rose 0.9%, with most major regional markets, barring Swiss stocks, rebounding from Friday’s sharp losses, when worries about tariffs and a weak U.S. jobs report hammered sentiment.
The German DAX .GDAXI climbed 1.4%, France’s CAC 40 .FCHI rose 1.1% and Britain’s FTSE 100 .FTSE added 0.7%. Zurich’s SMI index .SSMI dipped 0.2% as trading resumed following a long weekend. Switzerland was left stunned on Friday after Trump hit it with one of the highest tariffs in his global trade reset, with industry associations warning that tens of thousands of jobs were at risk.
Swiss luxury watchmakers’ shares, including Richemont CFR.S and Swatch UHR.S, fell 1.3% and 2.3%, respectively. “It’s understandable why Switzerland is lagging. Companies most exposed to international trade flows appear to be under the greatest pressure. However, a quarter percent decline isn’t particularly significant,” said Russ Mould, investment director at AJ Bell.
Court decision by bank employees
Switzerland was ready to make a “more attractive offer” in trade talks with Washington, its government said on Monday. The duties were scheduled to go into effect on Thursday, giving Switzerland, which counts the U.S. as its top export market for pharmaceuticals, watches, machinery and chocolates, a small window to strike a better deal.
European stocks have moved further away from this year’s peak as U.S. tariffs on its key trading partners raise concerns about a resurgence in inflationary pressures and slowing economic growth. Banks .SX7P were a bright spot on the day, with shares in British lenders surging after the country’s Supreme Court overturned a ruling on motor finance commissions, easing fears among banks about a redress scheme some analysts had warned could run into the tens of billions of pounds.
The entire European market is feeling the impact of US trade policy, but Switzerland is undoubtedly the most impacted. The country was the main target of this new measure on the continent, and saw its companies most exposed to the export chain suffer immediate devaluations. Investors are cautious due to the uncertainty surrounding the duration of this tariff policy.
UBS backs down on US fine
Lloyds LLOY.L added 9% to the top of the STOXX 600, while Close Brothers CBRO.L surged 24%. Barclays BARC.L, Bank of Ireland BIRG.L and Santander SAN.MC all gained more than 2% each. UBS UBSG.S dipped 0.7% after the bank said it would pay $300 million to resolve U.S. mortgage securities cases related to the misselling of mortage-linked investments.
The news that USB will pay US$300 million in the settlement with US authorities has set off alarm bells in the market. This means that Swiss banks remain on the radar of international regulatory agencies, making this situation even more delicate and putting further pressure on the country’s economy.
Switzerland needs to reach an agreement with the US
Now is the time for Switzerland to accelerate negotiations to avoid further damage to its exports. This instability generated by the US tariffs compromises two very important sectors for Switzerland and also raises doubts about the trade situation of its European partners. With these moves, it will be necessary to realign economic priorities in Europe.
GCN.com/Reuters