Switzerland says it's ready to make Trump 'more attractive offer' on trade

The U.S. is set to impose a 39% import tariff on Swiss goods by August 7, citing an imbalanced trade relationship and Switzerland's $48 billion trade surplus. In response, the Swiss government is preparing a "more attractive offer" to Washington to avert the duties, which threaten nearly 60% of Swiss exports to their top market. This tariff is projected to reduce Swiss GDP by up to 1% and has already prompted negative market reactions, including declines in Swiss equities and the franc, potentially influencing Swiss National Bank policy.

Analysis

The U.S. administration's plan to impose a 39% import tariff on Swiss goods by August 7th presents a significant and immediate threat to Switzerland's export-driven economy. This tariff, which would affect nearly 60% of Swiss exports to its top market, is projected to reduce Swiss GDP by 0.3% to 0.6%, with the potential for a contraction exceeding 1% if the dispute is prolonged or extended to pharmaceuticals. The Swiss government is attempting to avert this outcome by preparing a "more attractive offer" for Washington, signaling a preference for negotiation over retaliation, despite internal political calls to scrap a 6-billion-franc U.S. fighter jet deal. The market has reacted with pronounced negativity, evidenced by a 0.4% decline in the Swiss blue-chip index (.SSMI), which lagged the broader European STOXX 600. Shares in export-focused luxury firms Richemont (CFR.S) and Swatch (UHR.S) fell 1.5% and 1.8% respectively. Concurrently, the Swiss franc has become the worst-performing major currency against the dollar, reflecting both the trade risk and the possibility, noted by Nomura, of a Swiss National Bank interest rate cut in September to cushion the economic blow.

Key Decisions for Investors

• Investors should exercise extreme caution with exposure to Swiss equities, particularly export-oriented sectors like luxury goods and machinery, given that a 39% tariff threatens nearly 60% of exports to the U.S.
• The Swiss franc is likely to remain under pressure ahead of the August 7 deadline, so consider hedging CHF-denominated asset exposure or exploring tactical short positions against the U.S. dollar, especially with a potential SNB rate cut on the horizon.
• Closely monitor communications from both the Swiss Federal Council and the White House, as any sign of a negotiated settlement could trigger a sharp relief rally in affected Swiss stocks and the franc.
• The high tariff rate, despite Switzerland's relatively smaller trade surplus compared to the EU or Japan, highlights significant unpredictability in U.S. trade policy, warranting a broader risk review for companies in other countries with large U.S. trade surpluses.