The US is Switzerland\u2019s most important trading partner, receiving 18% of its exports.<\/p>\n
Following the implementation of Trump\u2019s 39% tariff last month, Swiss financial giant UBS cut its economic growth forecast for the country to 0.9% in 2026 from a previous estimate of 1.2%. If the levies remain in place and no deal is struck, the bank said up to 0.4% percentage point could be shaved from Swiss growth next year.<\/p>\n
Small, mountainous Switzerland \u2014\u00a0a country that ranks 61st in the world by total area \u2014 is one of the world\u2019s biggest investors in the US. The annual\u00a0 $350 billion investment the country makes in America is sixth in the world, not in per capita terms, either, in real dollars.<\/p>\n
The US Bureau of Economic Analysis estimates<\/a> that the roughly 4,000 subsidiaries of Swiss companies in the US employ 407,000 Americans. According<\/a> to the Swiss government, those subsidiaries pay the highest average salary ($109,000) to US employees of the seven largest national investors in America.<\/p>\n That\u2019s what happens when you\u2019re the home of powerful multinationals like Novartis, Roche and Nestl\u00e9.<\/p>\n \u2018Hit by the Tariff Sledgehammer<\/strong>\u2019<\/p>\n Trump argues that many countries benefit disproportionately from access to the US market without giving the US a fair return.<\/p>\n In Switzerland\u2019s case, a $38 billion goods trade<\/a> deficit last year, up 56% from 2023, raised the president\u2019s concern. \u201cThat\u2019s a big deficit,\u201d Trump said last month.<\/p>\n That, analysts at investment bank J. Safra Sarasin wrote, was Trump\u2019s justification for hitting Switzerland with \u201cthe tariff sledgehammer,\u201d putting its rate well above the EU\u2019s 15% or the UK\u2019s 10%.<\/p>\n Swiss officials have balked at some of the US administration\u2019s calculations: For one, the US had a services trade surplus of $29.7 billion with Switzerland last year, up 31% from a year earlier. That means the total goods and services deficit with Switzerland was $8.6 billion, much lower than the $38 billion figure the administration has focused on.<\/p>\n Switzerland also faces uncertainty regarding the federal court\u2019s tariff ruling: The president didn\u2019t sign off<\/a> on its tariffs until July 31, later than other levies and after the court challenge had already been launched.<\/p>\n That means the executive order authorizing the Swiss tariffs wasn\u2019t addressed in the appellate case, nor is it mentioned in the 127-page<\/a> ruling that deemed five other executive orders unlawful.<\/p>\n The head of the Swiss-US Chamber of Commerce told<\/a> NZZ am Sonntag his group assumes the outcome of the case will apply to Switzerland regardless. But there\u2019s no guarantee the Supreme Court rules against Trump. Even if it declines to take the case or upholds the appeals ruling, most experts expect the administration to pursue other means to enforce tariffs.<\/p>\n Gold and Pharma: Two Sticking Points<\/strong><\/p>\n The current tariffs on Switzerland target roughly 60% of its exports to the US, according<\/a> to the Swiss government. But, for now, the US has exempted the two largest Swiss exports, gold and pharmaceuticals, from the levies.<\/p>\n Because Switzerland refines about 70% of the world\u2019s gold supply, the high volume of bullion shipped from the country can inflate its apparent trade surplus with the US.<\/p>\n The world\u2019s gold trade flows between New York and London, but bars make a stopover in Switzerland, where they\u2019re recast into different sizes because the two leading financial hubs use different metrics. While Switzerland exports $100 billion of gold a year, the gold refining sector operates at very low margins, earning just a few hundred million dollars in the same time frame.<\/p>\n The soaring demand for gold caused by tariffs this year has boosted refining in Switzerland, adding to the distortion of trade data. In the first quarter, for example, a record $36 billion in bullion exports accounted for over two-thirds of Switzerland\u2019s trade surplus with the US.<\/p>\n The Swiss National Bank argued<\/a> that Washington should leave gold out of its tariff calculation. The trade deficit, based on the US calculation that factors only goods and includes gold, stands at $59 billion this year, the newspaper Aargauer Zeitung reported<\/a> Friday.<\/p>\n The biggest reason Switzerland has a trade surplus with the US is its leading pharmaceutical industry. Last year, the sector exported $30 billion of treatments to the US, nearly half of Switzerland\u2019s exports to the country, and roughly equivalent to 4% of Switzerland\u2019s GDP.<\/p>\n Trump has lashed out at overseas pharma companies in Switzerland and elsewhere for charging higher prices to Americans.<\/p>\n In July, his administration sent<\/a> an ultimatum to major pharmaceutical companies, including Novartis and Roche subsidiary Genentech, urging them to take steps to lower US prescription drug prices to \u201cmost favored nation\u201d levels by late September.<\/p>\n \u201cHow did [the Swiss] become so rich?\u201d Trump\u2019s Commerce Secretary Howard Lutnick asked in an interview with Bloomberg Television on Friday. \u201cThey sell us pharmaceuticals like it\u2019s going out of style, right? They make so much money off America; that\u2019s why they\u2019re rich.\u201d<\/p>\n Even though the pharmaceutical industry is currently exempt from tariffs, it\u2019s only because the Trump administration is preparing even steeper levies under a different mechanism. Trump said<\/a> last month that, in the next year, drug imports could face tariffs of \u201c150% and then it\u2019s going to go to 250% because we want pharmaceuticals made in our country.\u201d<\/p>\n The US is therefore likely to expect significant concessions from Switzerland and its pharmaceutical sector if the two sides are to achieve a deal. \u201cI am not optimistic,\u201d Lutnick told Bloomberg TV.<\/p>\n Deal or No Deal<\/strong><\/p>\n The crown jewel of the Swiss economy is its financial sector.<\/p>\n Leading investment bank UBS has stood strong, reporting profit before tax surged 49% to $2.19 billion in the second quarter.<\/p>\n But macroeconomic factors, driven by Trump\u2019s moves, are adding complexity. The Swiss franc, often viewed as a safe-haven asset during market turbulence, has climbed<\/a> over 13% against the US dollar this year.<\/p>\n The currency\u2019s surging value is weighing on inflation, where Switzerland has the opposite problem of much of the world. Consumer prices are climbing too slowly, just 0.2% year over year in August, according to the Swiss National Bank.<\/p>\n Months of deflationary data already led the central bank to slash its key interest rate to 0% in June, in the hope that it would stimulate spending.<\/p>\n The interest rate cut means banks now expect declines in their interest income. In July, UBS and Z\u00fcrcher Kantonalbank started applying interest rates of -0.2% and -0.25%, essentially charging for holding their liquid assets.<\/p>\n Swiss monetary policymakers have their next meeting later this month, but have already said it would take more incentive than usual to place interest rates into negative territory. Financial experts aren\u2019t ruling it out.<\/p>\n \u201cA return to negative interest rates before year-end appears increasingly probable,\u201d ING analysts wrote in June.<\/p>\n \u201cIn Switzerland, severe job losses are all but certain in the coming months, if there is no swift resolution to the US tariff shock,\u201d J. Safra Sarasin analysts wrote in an investor note last month. \u201cAs a result, the likelihood of negative SNB policy rates has risen.\u201d<\/p>\n That scenario would not be entirely new, as Switzerland spent<\/a> seven years with negative interest rates from 2015 to 2022. But, as it did then, a return to negative rates would squeeze the $4.1 trillion Swiss banking sector\u2019s profitability by reducing the interest margins on their domestic savings and mortgage businesses.<\/p>\n