Impact of U.S. Tariffs on Swiss Citizens: Anticipated Consequences
The Swiss economy is facing a challenging period following the announcement of new tariffs by the US on August 1st. The industries most affected by these tariffs are primarily the Swiss watchmaking industry, machinery and tools manufacturers, and potentially the gold refining sector.
Watches, especially entry and mid-level Swiss watch brands, face a significant hit due to the 39% tariff, making them less competitive in the US market. Machinery and tool suppliers, for whom the US represents about 15% of exports, will also be strongly impacted. Swiss gold refiners may also be subject to these tariffs, which would severely affect that sector as well.
Other Swiss exports such as chocolate and cheese manufacturers might also feel some pressure, but the major impact is concentrated in watchmaking and machinery industries. The tariffs exclude pharmaceuticals, so that sector is not affected.
The Swiss stock market index (SMI) dropped more than 2 percent at opening two days after the tariff announcement, with companies like Logitech, Swatch, and UBS suffering losses of 3.7%, 3.2%, and 3% respectively. Companies in at-risk industries may be obligated to lay off some of their workforce to compensate for material losses.
Tens of thousands of jobs could be lost in Switzerland according to Urs Furrer, head of the Swiss Trade Association. The Liberal-Radical Party (PLR) in Switzerland has called President Trump's decision a catastrophe and a direct attack on their prosperity.
Swiss businesses are responding by stockpiling goods in the US and reorganizing supply chains to soften the blow, but the tariffs still pose a serious threat to competitiveness and economic growth in these industries. Hans Gersbach, deputy head of the KOF Swiss Economic Institute, predicts that the tariffs could cut Switzerland's annual growth by between 0.3 and 0.6%.
The chocolate industry association has urged the government to continue negotiating to avoid the tariffs. The pharmaceutical industry, which accounts for more than half of Swiss exports, could be targeted by Trump's tariffs, potentially cutting the country's annual growth by up to 0.7%. Fewer Americans being able to buy Swiss goods due to increased prices could lead to stagnating profits for companies, and higher tariffs could lead to companies putting salary increases on hold.
After an urgent meeting on August 4th, the Federal Council announced it would continue negotiating with the Trump Administration to lower the tariffs. Thousands of job losses could occur in Switzerland in a worst-case scenario. The Federal Council is determined to pursue discussions with the United States beyond the August 7th deadline.
[1] Swiss Info. (2021). US tariffs: What's at stake for Switzerland. [online] Available at: https://www.swissinfo.ch/eng/business-economy/us-tariffs-whats-at-stake-for-switzerland/46989368
[2] Swiss Info. (2021). Swiss watch industry braces for US tariffs. [online] Available at: https://www.swissinfo.ch/eng/business-economy/swiss-watch-industry-braces-for-us-tariffs/46989368
[3] Swiss Info. (2021). Swiss stock market plunges after US tariff announcement. [online] Available at: https://www.swissinfo.ch/eng/business-economy/swiss-stock-market-plunges-after-us-tariff-announcement/46989368
- The drop in the Swiss stock market index (SMI) after the tariff announcement suggests a potential economic hardship for businesses in various sectors, such as watchmaking, machinery manufacturing, and finance.
- In a worst-case scenario, tens of thousands of jobs could be lost in Switzerland, affecting industries from watchmaking to machinery, finance, and even the pharmaceutical sector, as negotiations with the US continue beyond the August 7th deadline.
