Switzerland reaches a trade agreement with the US – An initial assessment
Switzerland and the US have reached a much-anticipated trade agreement. The deal stipulates a significant reduction in existing US import tariffs on Swiss goods from 39% to 15%. While the agreement has not sparked euphoria within Switzerland’s export industry, it is broadly viewed favorably by leading economic officials and research institutes, having been widely anticipated. With the new 15% tariff, Swiss exporters are placed on an equal footing with their EU and Japanese counterparts, significantly strengthening their international competitiveness compared to the prior tariff burden.
Historical and global context
Just a year ago, US tariffs on Swiss products were below 1%. In a historical comparison, the newly agreed rate of 15% still presents a challenge. Globally, however, it aligns with the conditions faced by other key US trading partners such as the EU and Japan. Despite the remaining burden, the tariff reduction offers Swiss exporters much-needed relief and increased planning security. Companies can now realign their export strategies on a more reliable footing.
Impacts on the economy and monetary policy
The combination of lower tariffs and improved predictability is likely to support Switzerland’s economic development more strongly than forecast just a few months ago. For the Swiss National Bank (SNB), this may prompt a reassessment: expectations for additional interest rate cuts may be pushed into the future. A more resilient economy reduces pressure on the SNB to lower rates further. At the same time, a stable economic environment suggests the Swiss franc will remain strong or continue to appreciate, with ongoing demand as a safe-haven currency.
Challenges remain
Despite the lower tariffs, the environment for the export industry remains challenging. This year, the franc has appreciated more than 12% against the US dollar, putting pressure on price competitiveness. Nonetheless, Switzerland has appropriate economic policy tools at its disposal to further stabilize business conditions, including export facilitation measures and targeted initiatives to secure employment, such as short-time work arrangements.
Implications for financial markets
Yet global financial markets are currently preoccupied with other topics, such as valuations and growth potential for companies in the field of artificial intelligence, as well as US Federal Reserve interest rate policy. For the Swiss equity market, however, the US–Switzerland agreement is a positive signal, especially for small and mid-cap companies focused on exports. The new trade environment broadens both the economic and strategic options amidst an otherwise challenging global backdrop.
Our investment outlook remains unchanged. Having anticipated an adjustment to trade tariffs in line with the EU's rate, our assessment of financial markets already reflects these expectations.