'We haven't sold our soul to the devil': Switzerland's trade deal with the U.S. divides opinion

Switzerland and the U.S. have finalized a trade deal, reducing tariffs on Swiss exports from 39% to 15% and securing $200 billion in Swiss investments in the U.S., offering relief to Swiss manufacturers who faced significant export declines. Despite domestic criticism and the deal being a non-binding framework, UBS projects Switzerland's GDP growth at a subdued 1% for 2026, below its 1.9% historical average, as remaining tariffs are still substantial and the anticipated relocation of pharmaceutical manufacturing to the U.S. is expected to weigh on medium-term growth.

Analysis

The recently announced U.S.-Switzerland trade deal reduces duties on Swiss exports to the U.S. from 39% to 15%, while Swiss companies commit to $200 billion in U.S. investments, including manufacturing expansion. This tariff reduction offers immediate relief to Swiss manufacturers, particularly those in mechanical and electrical engineering, which experienced a 15-40% export slump to the U.S. since August, aiming to level the playing field with European and Japanese competitors.

Despite the trade agreement, Switzerland's economic outlook remains subdued, with the economy shrinking 0.5% in Q3 2025, primarily due to a decline in the chemical and pharmaceutical sector. UBS projects 1% GDP growth for Switzerland in 2026, significantly below its 15-year average of 1.9%, suggesting that remaining tariffs on U.S. exports are still substantial enough to markedly slow export growth. Domestic consumption is expected to be the primary growth driver.

A significant concern is the anticipated relocation of pharmaceutical manufacturing to the U.S., a sector comprising half of Swiss exports to the U.S. and previously unaffected by the 39% tariff. UBS analysts expect this relocation, already flagged by some Swiss pharma companies, to weigh on Swiss growth in the medium term. Furthermore, the framework agreement is non-binding and requires further negotiations, parliamentary approval, and potentially a public vote, introducing implementation uncertainty.

Key Decisions for Investors

• Investors should closely monitor the finalization and parliamentary approval of the non-binding trade framework, as potential delays or changes could impact its effectiveness.
• Evaluate Swiss companies with significant U.S. export exposure, particularly those outside the pharmaceutical sector, for potential benefits from reduced tariffs, while also considering the medium-term headwinds for the pharmaceutical industry due to anticipated U.S. production relocation.
• Factor in UBS's subdued 1% GDP growth forecast for Switzerland in 2026, below historical averages, and consider the implications of continued substantial tariffs on U.S. exports and the domestic economy's role as the primary growth driver.