Swiss Pharma & Manufacturing: Navigating U.S. Tariffs and Currency Crosscurrents

The clock is ticking for Swiss exporters. As U.S. trade negotiations loom—set to determine whether tariffs on Swiss goods remain at 10% or revert to punitive 31% levels—the fate of pharmaceutical giants like Roche and Novartis hangs in the balance. With over $35 billion in U.S. pharmaceutical exports annually, the stakes are existential. Meanwhile, the Swiss franc's (CHF) strength against the U.S. dollar (USD) adds a volatile layer to this already high-stakes equation. For investors, this is a moment to dissect sector-specific risks, assess currency exposure, and position portfolios to capitalize—or hedge—accordingly.

Tariff Risks: A Double-Edged Sword

The U.S. has kept Swiss imports under a 90-day tariff “pause” at 10%, but this respite expires July 9. If unresolved, tariffs could leap to 31%, disproportionately harming Switzerland's pharmaceutical and watchmaking sectors. For pharma companies, which account for 40% of Swiss exports, the implications are stark:
- Roche: The world's largest biotech firm derives 40% of its revenue from the U.S. A 25% tariff on its $35 billion in U.S. exports would cost $8.75 billion annually. To mitigate this, Roche has pledged a $50 billion U.S. investment over five years, shifting production of key drugs like Hemlibra (a $4 billion/year product) to American soil.
- Novartis: The company's $23 billion U.S. manufacturing push aims to ensure all major therapies for the U.S. market are domestically produced, reducing tariff exposure.

Currency Crosscurrents: Franc Strength Compounds Challenges

While tariff negotiations dominate headlines, the CHF's 15% appreciation against the USD since early 2024 has quietly eroded Swiss exporters' margins. A stronger franc makes Swiss goods more expensive for U.S. buyers, effectively acting like an additional 2–3% tariff even at the current 10% rate. For example:
- A Swiss drug priced at CHF 100 (≈$108 at CHF/USD 0.93) becomes $115 if the franc strengthens to 0.95. This pricing pressure compounds if tariffs rise.

Investment Strategy: Position for Tariff Resolution, Hedge Currency Risks

1. Go Long on Pharma Stocks (If the Deal Passes):
2. Roche (RHHBY) and Novartis (NVS) are undervalued relative to their U.S. growth potential. A resolution to keep tariffs at 10% would unlock $10–15 billion in annual savings for these firms, boosting EPS by 5–8%.

3. Trigger to Buy: Confirm a deal by July 9. Monitor negotiations closely—Swiss officials are cautiously optimistic, citing “constructive progress.”

4. Hedge CHF/USD Exposure:

5. Use inverse currency ETFs like UUP (USD Bull/EUR Bear) to profit from a weaker CHF. Alternatively, short CHF futures via FXF or use options to cap losses.

6. Diversify into EUR/USD pairs if the euro's decline (due to ECB rate cuts) offers arbitrage opportunities.

7. Avoid Overexposure to Manufacturing:

8. Watch out for watchmakers like Rolex and Omega, which face a 31% tariff threat. Even a 10% rate may not offset the CHF's strength.

Key Risks to Monitor

• Agricultural Sticking Points: U.S. demands for Swiss dairy and wine concessions could delay the deal. If unresolved, tariffs stay high.
• Legal Uncertainty: A U.S. Supreme Court ruling on tariff legality (expected July) could invalidate the entire framework.
• Geopolitical Volatility: China-U.S. trade tensions could spill over, destabilizing currency markets.

Conclusion: A High-Reward, High-Risk Opportunity

Swiss pharmaceuticals present a compelling short-term bet—if the July 9 deadline is met. Investors should lean into Roche and Novartis, but pair this with currency hedging tools to neutralize CHF/USD swings. For the cautious, wait for confirmation before scaling up positions. The coming weeks will decide whether Switzerland's export engine roars or sputters—a critical pivot point for global pharma investors.

Data queries embedded above can be visualized via platforms like TradingView or Bloomberg. Always consider diversification and risk tolerance before making investment decisions.