A bilateral trade agreement between Switzerland and the US was due to come into force on 1 August 2025, just in time for our national holiday. After months of negotiations and the signing of a memorandum of understanding with a basic tariff of 10%, hopes for an agreement were high. However, US President Trump failed to give his decisive approval. This makes it clear that such memoranda of understanding are of little value without the personal approval of the US president, even if they have been negotiated with the highest representatives of the US administration.
As a result, instead of the negotiated base tariff, unilateral tariffs of 39 percent will apply to Swiss exports to the US from 7 August 2025. This tariff rate is one of the highest in the world and significantly higher than the 31 percent tariff that Switzerland was threatened with on ‘Liberation Day’ at the beginning of April. Although a short-term political U-turn cannot be ruled out before the tariffs come into force, time is pressing. Exceptions (still) apply to selected goods such as pharmaceutical products, certain chemicals and precious metals such as gold. This move puts an end to hopes of an immediate constructive trade agreement for the time being and poses considerable challenges for the Swiss export industry. The Federal Council announced today that it will continue talks with the US beyond the joint declaration of intent and, if necessary, beyond 7 August 2025, in order to secure competitive conditions for the Swiss economy that are comparable to those of its main competitors.
Temporary additional US tariffs of 10 per cent have been in force for almost all countries since 2 April 2025, supplemented by drastic levies on specific product groups such as steel and aluminium (50 per cent) and automobiles and car parts (25 per cent). The fact that a flat rate of 39 per cent is now to be levied on Switzerland is likely to have a noticeable impact on the competitiveness of many of our companies in the US. Small and medium-sized enterprises (SMEs) that manufacture exclusively in Switzerland – such as those in the watch industry or mechanical and plant engineering – will be particularly hard hit. These companies often lack the geographical production flexibility and pricing power of large multinational corporations. The latter – many of which are represented in the SMI – have globally distributed production sites and can adapt their supply chains, at least in the medium term, or partially compensate for them in other markets.
By way of comparison, the EU had previously agreed on a tariff rate of 15 per cent with the US. In return, it committed to comprehensive economic concessions. In future, energy imports from the US are to amount to around USD 750 billion, particularly liquefied natural gas (LNG) and oil. In addition, the EU announced investments (some of which were already planned) worth around USD 600 billion in the US. These include both direct corporate investments and increased military spending in favour of US defence companies.
Although key Swiss export goods remain exempt from US tariffs, there is still a considerable risk, particularly for the pharmaceutical industry. In 2024, this sector accounted for around 60% of Swiss exports to the US. US President Trump has announced that he will present proposals for significantly reducing drug prices within 60 days. He is deliberately using customs policy as an economic and industrial policy instrument to reduce the trade deficit, generate additional government revenue and promote domestic industries. The trend towards higher trade barriers is therefore likely to continue.
What does this mean for the markets in concrete terms? Swiss products will become significantly more expensive in the US – not only in comparison with US goods, but also with imports from countries such as Japan or the EU, which have more favourable customs agreements. The result will be falling demand for Swiss products, especially among price-sensitive consumers.
The average tariff burden in the US is likely to rise from below 4 per cent, including all global tariffs, to just under 20 per cent, which is just below the level last seen in the 1930s (Great Depression). This will make imported goods into the US more expensive, squeeze the margins of internationally active companies and dampen investment worldwide.
However, the tariffs do not only affect the Swiss economy – US consumers are also bearing the brunt:
- Products are becoming more expensive because many companies are passing on some or all of the higher import costs or have to purchase more expensive domestic alternatives.
- Choice is declining as some manufacturers may withdraw from the US market altogether.
- Inflation will be further fuelled.
It is unrealistic to expect the US economy to expand production in the short term – there is a lack of both production capacity and skilled workers, particularly in the manufacturing sector. Rapid substitution of imports with domestic production is therefore hardly realistic.
Possible implications for Switzerland: The more difficult export conditions to the US are likely to weigh noticeably on the Swiss economy, particularly in export-heavy regions and sectors. Slowing economic growth will further increase monetary policy pressure on the Swiss National Bank (SNB). Accordingly, it can be assumed that pressure on interest rates in Switzerland will hardly ease and that they will remain low for even longer.
In this environment of high uncertainty and political tensions, we remain cautiously positioned. We are maintaining our underweight in US equities as the economic outlook has further deteriorated. We remain overweight in gold as a safe haven and in Swiss real estate, as these asset classes have traditionally proven to be stabilising factors even in volatile market phases.
In times of heightened market uncertainty, it is particularly important to stick to a long-term investment strategy. Short-term reactions are often emotionally driven, but those who remain disciplined and pursue clear goals are better positioned in the long term. We are monitoring developments closely and will adjust our strategy as necessary. If you have any questions or would like a personal consultation, please do not hesitate to contact our client advisors.
