There’s a conflict between political and business leaders in Swiss and the United States over the European country’s new response to US tariffs. Historically known for its neutrality in conflicts and well-balanced trade relations, Switzerland now finds itself at the center of a high-impact tariff dispute. The sectors most affected are expected to be watches, pharmaceuticals, and precision machinery.
Switzerland calls meeting after 39% tax
Switzerland’s government will hold an extraordinary cabinet meeting on Monday to discuss its response to President Donald Trump’s 39% tariff on Swiss imports, which threatens to inflict heavy damage to its U.S.-dependent luxury goods industry. Switzerland was left stunned on Friday after Trump hit the country with one of the highest tariffs in his global trade reset, with industry associations warning that tens of thousands of jobs were at risk.
The duties are scheduled to go into effect on Thursday, giving Switzerland a small window to strike a better deal. Industry leaders and politicians were struggling to understand why the country was singled out – the EU, Japan and South Korea, for example, face 15% levies – but Switzerland had a 38.5 billion Swiss franc ($48 billion) trade surplus with the United States last year.
Swiss President Karin Keller-Sutter told Reuters on Friday that Switzerland had given U.S. goods virtually free access to its market, and Swiss companies had made very important direct investments in the United States. “The president (Trump) is really focused on the trade deficit, because he thinks that this is a loss for the United States, that every year with Swiss exports, the United States loses, well, 38.5 billion (francs),” she told Reuters.
Understanding the causes and articulations of the crisis
Further measures would have to be discussed by the full Swiss cabinet, she said. “I’m not ready to make an offer today. I think we have to discuss that in government,” Keller-Sutter said. Swiss officials have rejected reports that the higher than expected tariffs were imposed after a bad-tempered telephone call between Keller-Sutter and Trump late on Thursday.
The government is open to revising its offer to the United States in response to the tariff rate, which is due to go into effect on August 7, Business Minister Guy Parmelin said on Sunday. He said options included Switzerland buying U.S. liquefied natural gas or further investments by Swiss companies in the United States, its biggest export market for pharmaceuticals, watches and machinery.
The Swiss government, even after the surprise US tariff, maintained its diplomatic stance to resolve conflicts. The government is willing to review previous offers and suggests possible concessions with the US to expand investment in the American market. This move is important to alleviate short-term economic impacts and also to protect the country’s most strategic trade ties, as the US is one of the main destinations for Swiss exports.
The market decides to react cautiously
An index of Swiss blue-chip stocks .SSMI hit its lowest level since mid-April on Monday, as shares in banks, luxury retailers and pharma companies tumbled. The SMI index was last down 0.6% on the day, compared with a 0.6% rise in the regional STOXX 600 index .STOXX. In Zurich, shares in high-end watchmakers such as Richemont CFR.S and Swatch UHR.S fell in volatile trading.
Luxury watch companies like Richemont and Swatch were the first to feel the impact of the tariffs. Both companies are exposed to the American market, and this decline worries experts due to the immediate impact on jobs, production, and global competitiveness of the luxury sector.
Switzerland races against time to prevent further damage
To address the tariff crisis, Switzerland is seeking dialogue and alternatives that will require intense challenge. This situation could shake one of the key sectors of the national economy and cause millions in losses for companies. We are eager to see how the crisis unfolds and what Switzerland’s international stance will be in the more complex context of trade disputes.