U.S. Imposes 39% Tariff on Switzerland, New Deadline Offers Hope for a Deal

The US has imposed a 39% tariff on Switzerland, a significant shock to the Alpine nation, as the US accounts for around a sixth of Switzerland's total exports. Businesses had breathed a sigh of relief in April when the country swerved initial plans for a 31% tariff. However, the new tariff rate comes with a new deadline of August 7, leaving room for a potential reprieve. Switzerland's federal council expressed regret and sought a negotiated solution.

The United States has imposed a 39% tariff on Swiss imports, a significant blow to the Alpine nation's economy. This levy, one of the steepest globally, threatens key Swiss exports, including luxury goods and pharmaceuticals, which account for a substantial portion of the country's total exports. The new tariff rate is higher than the previously threatened 31% and comes with a new deadline of August 7, leaving room for potential negotiations.

Switzerland's federal council expressed "great regret" over the decision, stating that the new tariff rate differs significantly from a draft framework the countries had been negotiating. The Swiss government plans to continue negotiating with the US and hopes to agree to lower levies, according to a person familiar with their thinking. The Swiss franc was among the worst-performing major currencies on Friday, sliding 0.2% against the US dollar, though it remains stronger than before the initial tariff announcement in April.

Swiss chocolatiers like Lindt and watchmakers such as Swatch Group and Rolex face potential sales declines in the world's largest consumer market due to the higher tariffs. Pharmaceuticals, which accounted for nearly half of Swiss goods exports to America in 2024, are also at risk. The Swiss economy relies heavily on contributions from industry giants like Novartis and Roche Holding, which now face a double squeeze from Trump's tariff campaign and pressure for lower drug prices.

Industry lobby groups such as Swissmechanic and Swissmem have called the 39% rate "dangerous," urging the government to negotiate within the narrow window until the tariffs take effect on August 7. They argue that the rate is markedly higher than other trading partners who were able to negotiate frameworks with the US, such as the European Union, Japan, and South Korea, which landed on 15% levies.

The US had a $38 billion trade deficit with Switzerland last year, just outside the top 10 trade shortfalls. Trump's tariff rate comes despite months of high-stakes diplomacy intended to complete an agreement. The Swiss economy, while small in size, commands significant political influence, particularly in the agricultural sector, which has threatened to fight any settlement affecting Swiss high-tariff barriers.

Switzerland might not have been able to offer the US the concessions other countries were able to provide. It had already unilaterally scrapped industrial tariffs and suggested lower import rates for American citrus fruits, nuts, and shellfish, plus simplified approval for medical devices, which may not have been tempting enough for the US.

The Swiss National Bank had previously signalled it was done with easing after the initial tariff announcement in April, causing a sharp Swiss franc appreciation. This prompted the bank to cut interest rates to zero.

Trump's sweeping tariff agenda aims to pressure countries and industries to reshore manufacturing in the US and reduce global trade imbalances. The seven-day window for the new tariffs to be implemented provides time for additional negotiations for those interested in reducing reciprocal or sectoral rates, including Switzerland, India, and Taiwan.

References:
[1] https://www.businesstimes.com.sg/international/global/switzerland-hit-steep-39-tariff-us-trade-blitz
[2] https://search.yahoo.com/search?fr2=p:fp,m:tn,ct:all,kt:org,pg:1,stl:txt,b:&fr=fp-tts&p=US+Canada+Trade+Relations