39% US tariffs come into effect: How will the Swiss economy be impacted?

As of 6.01am on Thursday, August 7, the new US import tariffs have taken effect, adding a 39-percent tariff on all products from Switzerland imported to the US. We take a look at what is happening, and what the impact on the Swiss economy is likely to be. 

Swiss delegation returns empty-handed from Washington tariff negotiations

Despite a last-ditch effort to come to an agreement that saw Swiss President Karin Keller-Sutter and Economics Minister Guy Parmelin fly to Washington to meet with the US Secretary of State, Marco Rubio this week, there is no indication that the US is planning to withdraw its tariff of 39 percent on Swiss products. 

Keller-Sutter and Parmelin had hoped to come to an agreement with US officials to avert the tariffs at the last minute. The plan was to reduce the tariffs to around 15 percent, Watson reports - that same rate that has been added to products from the EU. 

How will the 39% US import tariffs impact the Swiss economy?

That means that, officially, the tariffs are now in place. The tariffs will put Swiss manufacturers at a disadvantage compared to their main competitors, because the US tariffs on Swiss products are much higher than the tariffs on competing products from the EU and Japan, for instance. 

The watchmaking, tech and mechanical engineering sectors are expected to be particularly affected, as well as cheese and chocolate manufacturers. The US is the largest single market for Swiss watches, for instance, with the industry exporting 7,6 billion dollars’ worth of watches to the US in 2024, a fifth of all watch exports. 

How are Swiss industry associations reacting?

Jean-Philippe Kohl of the Swissmem industry association told Der Bund he was also fearful for businesses in the tech sector. “A tariff rate of 39 percent eats up every margin,” he said. “Then the market is simply no longer profitable.” The tariffs would see product prices in the US rise by around 20 percent. “No customer wants to pay that kind of thing,” he said. Economiesuisse said that the tariffs could see Swiss export companies cut tens of thousands of jobs. 

While larger businesses are already examining the possibility of setting up production facilities in the US, or in the EU, to export from there to the US and benefit from the bloc’s lower tariff rates, this isn’t an option for most small and medium-sized enterprises. They are likely to lose out on the US market entirely. 

Chemical and pharmaceutical companies are the only Swiss industries that have been given a (temporary) reprieve, with President Trump giving them until the end of September to propose measures to reduce the prices of their products in the US. After that, they will be hit with gradually increasing tariffs, with Trump throwing out the possibility of a 250-percent tariff on medicines. Such a punitive tariff would be a huge blow, with more than half of all Swiss exports to the US being chemical and pharmaceutical products, worth a total of more than 64 billion Swiss francs. 

What happens now?

Trade associations are against the idea of Switzerland imposing counter-tariffs on the US, as Canada has done, on the basis that the Swiss market is too small to exert any real pressure. Instead, they are calling for the government to provide relief to affected industries, for instance by extending the short-time work compensation. 

Economiesuisse has also highlighted the importance of maintaining a good relationship with the EU, Switzerland’s most important trading partner, and ratifying its agreement with the EU as soon as possible. Swissmem has also called for Switzerland to establish new free trade agreements with countries in South America. 

For now, the Federal Council will continue negotiations with the US government, with the idea of improving the offer from the Trump administration, perhaps by pledging to import more from the US.