On Thursday (July 31), the US President announced a 39% punitive tariff on Switzerland, coinciding with Switzerland’s National Day holiday. This is the highest of a series of tariffs announced by the US that day, exceeding the earlier threat of a 31% tariff. The Swiss government had been confident they could avoid such severe measures.
In 2024, Switzerland’s total exports to the US exceeded $63 billion, making it the 13th largest trade deficit country for the US. This figure had sparked President Trump’s dissatisfaction.
US Trade Representative Jamieson Greer told Bloomberg on Friday (August 1), “We simply cannot agree on the best solution to reducing the trade deficit. They (Switzerland) are sending a lot of drugs to our country, while we want to produce drugs domestically.”
According to a source familiar with Swiss affairs cited by Bloomberg, Swiss trade negotiators were caught off guard by the White House’s statement, as they had previously received encouraging signals from several senior US officials.
The Swiss government announced on Friday that they will negotiate with the US in an effort to avoid the implementation of the 39% high tariff, as this rate would severely impact Switzerland’s key industries.
The new tariff rates are set to take effect on August 7, primarily targeting Switzerland’s manufacturing and watchmaking industries.
In a statement on social media platform X, the Swiss government expressed that they are still in contact with US authorities and “hope to find a solution through negotiations.”
Swiss Federal President and Finance Minister Karin Keller-Sutter spoke with Trump on Thursday. Following this, she posted that the trade deficit remains a focus of Trump’s attention, and the two sides could not reach a consensus on a framework trade agreement.
According to Swiss customs data, the US is an important trading partner for Switzerland, accounting for 18.6% of Switzerland’s total exports last year.
Of Switzerland’s exports to the US, drugs make up 60%, followed by machinery and metal products at 20%, and watches at 8%.
Economist Adrian Prettejohn from Capital Economics stated that the unexpected 39% tariff imposed by the US on Switzerland may be reduced through negotiations in the future, and there is a possibility that drugs could receive exemptions.
Although Trump pledged tariffs of up to 200% on imported drugs, these tariffs would be calculated separately as reciprocal tariffs. Referring to agreements already reached, the EU successfully persuaded the US to cap drug tariffs at a fixed rate of 15%.
In addition, Trump demanded on Thursday that major pharmaceutical companies reduce prices or face penalties, aiming to alleviate the high cost burden of medicine for Americans.
Swiss pharmaceutical giants Roche and Novartis announced plans to invest billions of dollars in the US over the next five years to counteract the impact of tariffs.
According to estimates by Capital Economics, if the US maintains the 39% tariff rate, Switzerland’s GDP could decrease by around 0.6%. If drugs do not receive tariff exemptions, the impact would be even more significant.
Currently, nearly 40% of Swiss products exported to the US are drugs or chemicals, many of which are duty-free. However, this situation may change after the US completes its investigation into the 232 provision on drugs. Gold also does not incur import taxes.
However, other Swiss industries such as watches, machinery, and chocolate may be affected by the 39% tariff.
The trade association representing small and medium-sized enterprises in the Swiss machinery and metal processing industry urged the government to use the negotiation window before the new tariff takes effect, warning that the new tariff would have serious long-term consequences.
Furthermore, the US is also concerned about the stability of the Swiss franc’s exchange rate. In June, the US Treasury listed Switzerland as a country under surveillance for unfair economic and currency practices. Driven by safe-haven demand, the Swiss franc surged, putting pressure on the Swiss National Bank to soften the currency. The central bank stated that its actions are aimed at stabilizing inflation, not gaining a trade advantage.
During Trump’s first term, Switzerland was previously labeled as a currency manipulator by the US government.