US President Donald Trump announced a radical measure – starting August 7, 39% tariffs will be imposed on a wide range of goods from Switzerland. This is an unprecedented blow to one of the world’s most stable economies. Traders and investors – attention: serious consequences are looming for Switzerland and the Swiss franc (CHF).
Why Switzerland?
- Punishment for Surplus: Switzerland runs a significant and persistent trade surplus with the USA. Trump historically views this as “unfair.”
- Aggressive Neutrality: Switzerland’s policies (neutrality, past banking secrecy, attractiveness for capital) have often irritated the Trump administration.
- Negotiation Tactic: A hard move to coerce Switzerland into concessions on other issues (possibly US corporate taxes or market access).
Immediate Threats to the Swiss Economy
Sharp Export Decline to a Key Market:
The US is Switzerland’s second most important export market after the EU. A 39% tariff will make Swiss goods catastrophically uncompetitive.- Pharmaceuticals and Chemicals (Giants like Roche, Novartis): The largest export category to the US. Prices will soar, demand will fall. A blow to revenue and profits of the giants.
- Watches (Rolex, Swatch Group, Patek Philippe): Icons of Swiss quality and export. Luxury brands may partially pass on costs, but the mid-segment will suffer severely. Demand will sharply decline.
- Machinery and Equipment (ABB, Schindler): High-tech but expensive goods will lose price advantage.
- Agricultural Products (Cheese, Chocolate): Niche but important for image and regions, these will become “luxury items” in the US.
GDP Reduction:
Exports are a key engine of the Swiss economy. A significant drop in exports to the US will inevitably slow GDP growth, potentially causing recession in export-oriented sectors.Pressure on Companies and Labor Market:
Sales decline will lead to profit drops, revised investment plans, hiring freezes, and possible layoffs. Pressure on the SMI stock market.Search for Alternative Markets:
Companies will be forced to urgently pivot to the EU, Asia, and other regions. This process is costly, complex, and will not compensate for US losses in the short term.Risk of Escalation:
Swiss retaliation (though unlikely on a symmetric scale) or EU actions (to protect its interests) could worsen the situation.
Outlook for the Swiss Franc (USD/CHF): Volatility and Weakening
Before the announcement, USD/CHF traded around 0.8150, reflecting the franc’s status as a safe-haven currency. The new tariffs radically change the picture:
Volatility Will Spike Sharply: News on company reactions, export data, and SNB actions will cause sharp rate swings.
Swiss National Bank (SNB) Role: Intervention Very Likely: SNB has long fought a strong franc that harms exports. Now the threat is weakness due to the shock. However, CHF weakening now is the lesser evil compared to export collapse.
SNB Tactics: Most likely, SNB will allow franc weakening, possibly even stopping foreign currency purchase interventions (used previously to fight a strong CHF). Direct interventions to support CHF are unlikely — that would contradict exporters’ interests.
Interest Rates: If CHF weakening becomes too sharp and sparks imported inflation, SNB may delay expected rate cuts or even hint at holding rates to support the franc.
Medium-Term Outlook for the Franc
- Pressure on CHF Will Persist: While tariffs remain, the fundamental outlook for the franc stays negative. USD/CHF may stabilize between 0.82–0.85 depending on export decline depth and SNB actions.
- Safe-Haven Factor: May partially soften the drop. If tariffs trigger global market panic, investors could buy CHF again as a defensive asset, creating conflicting moves. However, the local Swiss shock is stronger than this factor.
- Conflict Resolution? If negotiations start and hopes of tariff repeal or reduction arise, the franc may begin to strengthen.
Strategy for Traders and Investors
- USD/CHF: Short CHF positions (buy USD/CHF) look attractive on the news. Targets: 0.8300, 0.8400, 0.8500.
- Swiss Exporter Stocks: Expect pressure on Roche, Novartis, Swatch, Richemont. Shorting or moving to cash is possible. Pharma may show relative resilience.
- Data Monitoring: Watch early Swiss export data (September–October), company earnings (Q3 reports), SNB statements, and any hints of negotiations.
- Risk Management: Extremely important! Volatility will be high. Use stop-losses and prudent position sizing.
Summary
Trump’s 39% tariffs are a severe blow to the Swiss economy. Exports to a key market will collapse, GDP growth will slow. For the Swiss franc, this means a high probability of significant weakening versus the dollar in the coming months. The USD/CHF range of 0.83–0.85 becomes a new realistic target. SNB actions aimed at allowing this weakness will be a key factor. Traders should prepare for periods of extreme volatility and consider franc-weakening strategies, while remembering its historic safe-haven role, which may re-emerge later or amid global turmoil. The Swiss economy’s “clockwork mechanisms” have met a powerful American “hammer.”
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