Switzerland's Economic Independence Allows It to Dodge the US-EU Trade War Conflict
In a rapid response to President Trump's warnings, the European Commission has taken a hardline stance, promising to respond swiftly and sternly to any new tariffs. The specifics of Europe's retaliatory actions are still under wraps.
Economic circles within Switzerland have been sweating bullets ever since Trump set foot in the White House, due to concerns about the potential repercussions of his trade war. Although Switzerland isn't a part of the European Union, it is linked to it through trade agreements. Taking the cake, the EU—and especially Germany—is Switzerland's top export market. Consequently, any tariffs imposed on European imports could bite Swiss companies hard.
The United States, being a significant destination for Swiss exports and investments, could also pose a financial threat. Higher tariffs could suck the life out of the revenue, which was projected to touch 56.7 billion francs in 2023, from US-bound exports.
However, Swiss President Karin Keller-Sutter, who is also the country's Finance Minister, seems unfazed. According to her, Switzerland will likely fly under the radar during the looming trade war between Washington and Brussels. But she has failed to explain why Switzerland—particularly its pharmaceutical sector, one of the country's primary export sectors—would be spared.
Helene Budliger Artieda, head of the State Secretariat for Economic Affairs (SECO), recently opened up about the situation in an interview. She stated that Swiss pharmaceutical companies already produce an abundance of goods in the US, making significant investments in research and development in the country. Additionally, Swiss companies also pay average wages of $140,000 (126,400 francs) per year in the United States. By supporting the US economy in this manner, "we have been doing exactly what the new government wants for a long time," she added.
The Swiss Forum on Foreign Policy (Foraus) believes that Trump isn't a fan of multilateral forums, like the EU. Instead, he leans towards bilateral relations. Interestingly, Foraus suggests that Trump seems to harbor a fondness for Switzerland too; however, only time will tell if this affection will save Switzerland from his tariff war.
On the downside, Switzerland has a hefty burden to bear due to a high tariff rate of 32% on its exports to the U.S., compared to the 20% imposed on the European Union and 10% on other non-EU European countries, like the United Kingdom or Norway. Besides, the U.S. is a critical market for sectors like watches and medical devices, with nearly 17% of Swiss watch exports and 23% of medical device exports going to the U.S. last year. The danger lies in the reduction of demand for these goods due to tariffs, posing a direct threat to these industries. Smaller Swiss companies, which lack production facilities in the U.S., are particularly at risk.
Switzerland has chosen not to retaliate against US tariffs, hoping to maintain diplomatic relations. However, this strategy offers no immediate economic relief, as Swiss exporters face increased costs without any reciprocal measures that could potentially offset these losses through tariffs on US imports. This leaves Swiss companies vulnerable, potentially leading to job losses and economic instability in the country.
- The Swiss Keller, being part of the wider European business community, is apprehensive due to President Trump's warnings about potential tariff wars.
- Swiss Finance Minister and President Karin Keller-Sutter appears unperturbed, suggesting that Switzerland may avoid the brunt of any trade war between the US and EU.
- Helene Budliger Artieda, head of the State Secretariat for Economic Affairs (SECO), has highlighted the significant investments Swiss pharmaceutical companies make in the US, which might theoretically protect them from potential tariffs.
- General news outlets have pointed out that Switzerland, despite not being part of the EU, faces a higher tariff rate of 32% on its exports to the US compared to the EU and other non-EU European countries, making Swiss companies, particularly smaller ones within the watch and medical device sectors, particularly vulnerable.
- The Swiss Forum on Foreign Policy (Foraus) has noted Trump's penchant for bilateral rather than multilateral relations and speculates whether this could lead to a preferential treatment of Switzerland by the US administration in the ongoing tariff war.
