Swiss Economy Slows Down Ahead of Tariff Impact

The Swiss economy has experienced a slowdown in growth, with GDP expanding by only 0.1% in the second quarter. This has added pressure on the central bank to return to negative interest rates, as luck may be running out for the economy. The slowdown is likely due to the impending US tariff hit, which could further hinder economic growth.

Switzerland's economy experienced a notable slowdown in the second quarter of 2025, with GDP expanding by just 0.1%, according to the latest data. This growth rate, while slightly above expectations, marks a significant deceleration from the 0.8% expansion in the first quarter [1]. The slowdown has raised concerns about the country's resilience in the face of ongoing U.S. tariffs.

The Swiss economy faces substantial headwinds from the U.S. tariffs, which currently stand at 39% excluding gold and pharmaceuticals. The pharmaceutical sector, a major contributor to Swiss exports, has been particularly vulnerable due to its reliance on the U.S. market. The industry's reliance on U.S. sales has made it a key vulnerability, with the Swiss government actively engaging with major pharmaceutical companies like Roche Holding AG and Novartis AG to discuss mitigation strategies [2].

The Swiss National Bank (SNB) has been under pressure to respond to the economic slowdown. With inflation approaching zero, Capital Economics predicts that the SNB will cut its policy rate by 25 basis points to -0.25% this year, most likely at its September meeting. This move would bring the rate to its lowest level since the global financial crisis [1].

The tariff negotiations with the U.S. have shown little progress, with Switzerland considering unconventional measures such as relocating FIFA headquarters or implementing a special tax on gold exports to the U.S. However, these measures are unlikely to address the core issues of trade imbalances [1].

Economists surveyed by Bloomberg predict that Switzerland's economy will prove resilient enough to largely shake off the shock of U.S. tariffs over the next year or so. They expect annual growth to be 1.4% in 2025 and 1.1% in 2026, with a small contraction in the second quarter followed by a pickup later in the year [3]. However, if the tariffs remain in place, they could reduce Swiss GDP by approximately 0.6% in the medium term. The Swiss government is committed to reducing these tariffs and maintaining close contact with U.S. authorities to find a resolution.

In conclusion, the Swiss economy faces significant challenges from U.S. tariffs, but economists remain optimistic about its long-term resilience. The central bank's potential move to negative interest rates and ongoing negotiations with the U.S. will be key factors in determining the economy's trajectory.

References:
[1] https://www.investing.com/news/economic-indicators/swiss-gdp-grows-01-in-q2-as-tariff-frontrunning-eases-93CH-4194629
[2] https://www.ainvest.com/news/swiss-government-discusses-tariff-impact-roche-novartis-2508/
[3] https://finance.yahoo.com/news/switzerland-tariff-shock-seen-barely-040000461.html