Switzerland's Economy to Feel Trade Fallout Despite Resilience

Switzerland's economy will take a hit in 2026 due to Donald Trump's high US trade levy, despite showing resilience in Q2 with 0.1% growth. The 39% tariff will impact industrial value added and exports, with the services sector delivering growth. Officials are pushing for a lower rate and the Swiss National Bank may introduce negative interest rates to boost domestic businesses.

Switzerland's economy, which has shown resilience in the second quarter of 2025 with a 0.1% growth rate, is expected to face significant challenges in 2026 due to the ongoing 39% US trade levy imposed by the Trump administration. This high tariff rate is set to impact industrial value added and exports, potentially slowing down economic growth. However, the services sector is expected to continue delivering growth, offsetting some of the negative effects [1].

The Swiss government is actively pushing for a reduction in the tariff rate, with the Swiss National Bank (SNB) considering the introduction of negative interest rates as a potential measure to boost domestic businesses and mitigate the impact of the tariffs. The SNB's decision to implement negative interest rates would aim to stimulate domestic demand and investment, thereby cushioning the economy against the adverse effects of the US tariffs [2].

UBS Group AG, a prominent Swiss bank, has been approached by the Swiss government to provide support in improving the US-Switzerland trade deal. The bank's strong presence in the US market and its expertise in financial services make it a valuable partner in these negotiations. However, UBS's involvement in the negotiations comes amidst a contentious debate over new bank rules that could impose substantial capital requirements on the bank [3].

The Swiss non-farm payrolls rose 0.6% year-on-year to 5.532 million in the second quarter of 2025, primarily driven by the services sector. The increase was supported by higher employment in administrative and support activities, management consultancy, real estate, and trade and repair of motor vehicles. In contrast, payrolls in the industrial sector declined 0.4% to 1.129 million, weighed down by lower manufacturing employment. This decline was partially offset by gains in mining and quarrying, electricity, gas, steam, and air-conditioning supply, water supply, waste management, and construction [4].

As the negotiations continue, UBS's role in improving the US-Switzerland trade deal remains a critical factor. The bank's strategic move to expand its presence in the data science and machine learning sector through its investment in Domino Data Lab could further enhance its ability to navigate complex financial landscapes and contribute to the success of the trade negotiations [3].

In conclusion, while Switzerland's economy has shown resilience in the second quarter of 2025, the impact of the US tariffs is expected to be significant in 2026. The Swiss government and the SNB are taking proactive measures to mitigate the adverse effects, with UBS playing a key role in the trade negotiations. The outcome of these negotiations will be crucial in determining the future trajectory of Switzerland's economy.

References:
[1] https://www.ainvest.com/news/ubs-group-aid-swiss-government-improving-trade-deal-2508/
[2] https://www.bloomberg.com/news/articles/2025-08-26/ubs-asked-by-swiss-economy-ministry-for-support-on-us-tariffs
[3] https://www.swissinfo.ch/eng/ubs-asked-by-swiss-economy-ministry-for-support-on-us-tariffs/89898050
[4] https://tradingeconomics.com/switzerland/non-farm-payrolls