In a rapidly changing global economy, the impact of President Trump's tariffs has sent shockwaves across nations, with governments striving to negotiate favorable deals. The United Kingdom was quick to secure a trade agreement with a modest 10% tariff, followed closely by the European Union with a 15% tariff. While these adjustments are higher than previous rates, they are significantly less than what could have been expected. However, the situation for Switzerland has taken a more drastic turn, facing a staggering 39% tariff that has left Swiss leaders scrambling for solutions.
As Switzerland is not a member of the EU, it does not have the luxury of benefiting from the trade agreements negotiated by Brussels. Despite being regularly ranked as the world's most competitive and innovative economy, Switzerland is now grappling with the consequences of these tariffs. The Swiss economy is not only a major investor in the US, contributing to the creation of approximately 400,000 jobs, but also a significant exporter. Jan Atteslander, director of international relations for the Swiss business federation Economiesuisse, expressed his disbelief: “This is unjustified; you can’t explain why they are so high.”
Since the announcement of the tariffs on August 1, Swiss leaders have made numerous attempts to renegotiate with Washington, but to no avail. With around 17% of Swiss exports heading to the US, the implications of these tariffs are severe. The once robust Swiss economy is now facing shrinkage, with potential job losses looming in crucial sectors.
Interestingly, while the pharmaceutical industry—one of Switzerland's most lucrative export sectors—remains unaffected by the 39% tariff, it is not entirely out of the woods. There are concerns about a potential 100% tariff on imported medicines, a threat recently made by Trump, which could deliver a catastrophic blow to this vital sector.
Another key contributor to Swiss exports is its world-leading medical technology industry. This sector, with roots in the traditional watchmaking industry, showcases the precision and innovation that Switzerland is known for. Adrian Hunn, managing director of Swiss Medtech, emphasizes the interconnectedness of this industry: “It’s a very integrated way of working. That’s why we call it an ecosystem that we have here in Switzerland.”
Companies like MPS (Micro Precision Systems), based in Biel—the historic heart of Swiss watchmaking—produce essential medical instruments that are crucial for the US healthcare system. The CEO of MPS, Gilles Robert, highlights the uniqueness of their production process, stating, “It would be extremely challenging if not impossible to separate the components from the actual product assembly.”
Given the current tariff landscape, the costs of medical devices are set to rise for US patients. Hunn notes that these increases could also extend to US taxpayers, as many healthcare costs are subsidized by public reimbursement programs. There is a growing concern that Swiss companies may halt exports to the US altogether, with reports indicating that some businesses have already ceased deliveries.
In light of these challenges, the Swiss government has chosen not to retaliate against US tariffs. The prevailing sentiment is that Switzerland, often depicted as the David in the face of America’s Goliath, cannot effectively combat the US. Instead, Swiss business leaders are actively pursuing alternative markets. A recent trade agreement with India, which boasts 1.4 billion potential consumers, came into effect on October 1, while negotiations with the South American trade bloc Mercosur have also reached a conclusion. Additionally, Switzerland's long-standing trade relationship with China is being strengthened, and its trade with the EU remains intact.
Although the US tariffs are already inflicting damage on the Swiss economy, there is a sense of resilience among Swiss leaders. Atteslander asserts, “To be a successful export nation, you have to have resilience in your DNA.” However, the long-term repercussions may affect the traditionally strong relations between Switzerland and the US. The Swiss feel a deep sense of betrayal, as the US was not just a vital market, but a place where they felt a strong entrepreneurial kinship.
Despite the current climate, there is hope for reconciliation. Both Hunn and Robert express a desire to overcome these challenges. Hunn reflects on his time in the US, stating, “Even though I’m sad about this situation, we will overcome; we’ll find solutions, and I’m sure in the end, reason will prevail.” As Switzerland navigates this turbulent landscape, the country remains committed to fortifying its global trade relationships, ensuring its continued success in the face of adversity.
