UBS Warns of 0.4% GDP Hit as Trump's 39% Tariff Crushes Switzerland's 2026 Growth Outlook

UBS economists have downgraded Switzerland's 2026 GDP forecast to 0.9% from 1.2% due to the 39% tariff imposed by the US. The consumer sector may cushion the economy in the short term, but risks have increased if job losses and wage stagnation occur. The Swiss government's SECO agency confirmed growth in H1 despite manufacturing declines. US Treasury Secretary Scott Bessent's deadline for trade talks and the possibility of tariffs on pharma exports add to uncertainty. The long-term hit could reshape Switzerland's trade surplus and weaken medium-term growth.

UBS Group AG has revised its growth forecast for Switzerland in 2026, predicting a 0.9% increase in GDP, down from a prior outlook of 1.2%. This adjustment is primarily due to the sustained impact of a 39% tariff imposed by the US on Swiss goods [1]. Analysts Alessandro Bee, Florian Germanier, and Maxime Botteron at UBS now anticipate a slower economic expansion, citing potential job losses and wage stagnation as significant risks [1].

The Swiss economy experienced a better-than-expected outcome in the first half of 2025, with services growth offsetting a contraction in manufacturing. However, the outlook for the rest of the year remains uncertain, with the Swiss government's SECO agency confirming that the economy sustained expansion despite manufacturing declines [1].

UBS economists expect high US tariffs to weigh on exports and labor markets, potentially leading to a 0.4 percentage point lower GDP growth rate if tariffs remain in place. This could also impact the labor market, with up to 0.4 percent of jobs at risk. The Swiss short-time work model, however, is expected to help mitigate the impact on unemployment [3].

The long-term implications of the tariffs are significant. UBS predicts that the Swiss pharmaceutical industry will need to build sufficient production capacity in the US to serve the American market and avoid high tariffs. This shift could erode Switzerland's trade surplus and weaken medium-term growth [3].

Adding to the uncertainty, US Treasury Secretary Scott Bessent has set a deadline for trade talks by the end of October. The possibility of tariffs on pharmaceutical exports further complicates the economic outlook for Switzerland [2].

In summary, UBS's revised forecast reflects the growing concerns over the impact of US tariffs on Switzerland's economy. While the consumer sector may provide short-term support, the long-term effects could be significant, reshaping Switzerland's trade surplus and potentially weakening medium-term growth.

References:
[1] https://www.bloomberg.com/news/articles/2025-08-29/swiss-outlook-for-2026-is-cut-by-ubs-amid-concern-on-tariff-hit
[2] https://timesofindia.indiatimes.com/technology/tech-news/us-treasury-secretary-scott-bessent-on-governments-plans-to-acquire-nvidias-shares-i-dont-think/articleshow/123549398.cms
[3] https://www.finews.com/news/english-news/69081-ubs-bip-prognose-wachstum-zoelle-usa-2