US Tariffs Spark Fears of Recession in Switzerland

The 39% US tariff on Swiss goods landed like a hammer blow. Currently, no other developed nation is facing anything close to this rate. The EU, Japan, and the UK all secured much lower tariffs, between 10 and 15%. The justification from the Trump administration centers around a $38.5 billion trade deficit with Switzerland. That number has now turned into a policy that Swiss officials are calling a potential economic disaster. Diplomatic talks had been ongoing right up to the deadline, but they went nowhere. President Keller-Sutter and Economics Minister Parmelin couldn’t get a breakthrough, and the US held firm.

Time, Chocolate & Gold

The Swiss watch industry in particular looks especially exposed. The US accounts for about 17% of total Swiss watch exports, worth roughly $5.4 billion annually. A 39% tariff, layered on top of a strong Swiss franc, pushes retail prices up by 60% or more for American consumers. It may turn out to be fatal for smaller players and vintage dealers. Some are already calling it “game over” for vintage watch exports to the US.

Chocolate exporters are in a similar bind. Chocosuisse estimates that once currency effects are factored in, producers face a 50% increase in costs. Big players might be able to absorb that by shifting production abroad, but smaller firms don’t have that option

Switzerland processes over 2,000 tons of gold annually. And, it exports more than $61 billion of it to the US alone. One-kilogram gold bars, a standard in global trading, are now subject to new tariffs, which are expected to increase costs by an estimated $24 billion. It will hit at the heart of Switzerland’s role as the world’s largest gold refining hub.

Measures by Market & Government

Markets initially shrugged, with the Swiss Market Index even ticking up slightly the day the tariffs took effect. But that optimism didn’t last across the board. Shares in luxury goods companies Richemont, Swatch Group, and LVMH slid by 5 to 6% when the news first broke. Currency dynamics are making everything worse. The Swiss franc has gained around 11–12% against the dollar over the past year. That’s great for consumers but terrible for exporters. The Swiss National Bank might have to act, possibly pushing interest rates further into negative territory just to stay afloat.

Swiss firms are already trying to adjust. Swatch Group reportedly has three to six months of inventory on US shelves. Others are raising prices. Breitling, for example, expects certain models to jump from $10,800 to $14,500. Companies are also eyeing new markets, but no one’s pretending that any of them can replace the scale or profitability of the US.

The government’s stance so far has been measured. They’ve said clearly they won’t go down the same path, fearing it would hurt the domestic economy more than it would help. Diplomatic efforts, however, haven’t borne fruit. President Keller-Sutter flew to Washington but didn’t even get a meeting with Trump. The fallback meeting with Secretary of State Marco Rubio led nowhere. A compromise offer of a 10% tariff proposal was flatly rejected.

Some political voices have floated unusual solutions, even suggesting that FIFA President Gianni Infantino could step in as a mediator, given his rapport with Trump. Whether that’s just political theatre or a sign of desperation is unclear. Whether Switzerland can continue to operate independently on the global stage, or whether closer alignment with the EU might offer a more stable buffer against future shocks. For now, what’s clear is that the tariffs have punched a hole in the country’s economic armor, and unless something changes soon, a Switzerland recession may no longer be just a fear; it could be a reality.