Swiss Manufacturing Sector Contracts Sharply Amid Rising Trade Barriers: April PMI Decline Signals Structural Challenges Ahead

The Swiss manufacturing sector faced a significant setback in April 2025, with the procure.ch Manufacturing Purchasing Managers’ Index (PMI) plunging to 45.8—its lowest level in nine months and the 28th consecutive month of contraction. This sharp decline, well below the 50-point threshold separating expansion from contraction, underscores deepening challenges driven by global trade tensions and protectionist policies.

Key Drivers of the PMI Deterioration

The April data revealed broad-based weakness across key components of the PMI:
- Order Backlogs: Fell by 5.5 points to 44.6, signaling a steep drop in demand.
- Purchasing Volumes: Declined to 44.1, reflecting reduced production planning.
- Employment: Slipped to 44.0, indicating ongoing workforce reductions.
- Inventories: Dropped to 41.5, with finished goods stocks falling further to 42.3, suggesting companies are scaling back output and managing excess stock.

The sole bright spot was a marginal rise in production to 49.7 (up 1.3 points), though it remained in contractionary territory.

Trade Barriers as the Primary Culprit

Analysts attribute the prolonged contraction to rising protectionist trade measures, particularly U.S. tariffs, which have disrupted supply chains and inflated input costs. Over 43% of surveyed industrial companies reported being directly impacted by new trade barriers in the past year—a sharp increase from 18% in March—and two-thirds anticipate further restrictions in the coming months.

This visualization shows the PMI’s steady decline since mid-2023, with April’s drop marking a new low. The prolonged contraction contrasts starkly with the sector’s peak of 70.0 in July 2021 and its long-term average of 53.6 since 1995.

Input Costs and Pricing Dynamics

While purchasing prices eased slightly to 47.8 (down 2.8 points), input cost pressures remain elevated due to tariffs and supply chain disruptions. Companies cited rising costs for energy, raw materials, and Chinese imports, though some cost savings were passed on to customers via declining output prices.

This graph highlights how input costs surged to over 60 in early 2022 but have since moderated, though they remain above pre-pandemic levels.

Sectoral and Geopolitical Implications

The manufacturing sector’s prolonged slump poses risks to Switzerland’s export-driven economy. Industries like computer/electronic products and transportation equipment—key contributors to Swiss exports—reported significant disruptions due to delayed port clearances and tariff-driven cost overruns.

This comparison reveals a strong correlation between the PMI and industrial production, with both metrics reflecting the sector’s downward trajectory since mid-2023.

Outlook and Investment Implications

Forecasts suggest a gradual recovery, with the PMI projected to rise to 49.8 by end-2025, 53.1 in 2026, and 53.6 in 2027—still below its historical average. However, these projections hinge on resolving trade disputes and stabilizing global demand.

Investors should:
1. Avoid overexposure to Swiss manufacturing equities, such as ABB (SIX:ABBN) and Swatch Group (SIX:UHR), until trade tensions ease.
2. Monitor policy developments, particularly U.S.-Swiss trade negotiations and potential tariff exemptions.
3. Consider defensive sectors like healthcare or consumer staples, which are less trade-sensitive.

Conclusion

The April 2025 PMI data paints a grim picture of a Swiss manufacturing sector entrenched in contraction, with structural challenges exacerbated by protectionism. While marginal improvements in production hint at tentative resilience, the prolonged slump—now spanning 28 months—demands cautious investment strategies. A rebound to pre-2023 levels requires not only easing trade barriers but also sustained demand recovery and cost stabilization. Until then, investors are advised to prioritize agility and risk mitigation in their portfolios.

The path forward depends on whether global policymakers can de-escalate trade conflicts and restore supply chain stability. For now, the data underscores a sector in need of both external policy shifts and internal operational adjustments to regain momentum.