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Switzerland Faces Rising Pressure from U.S. Tariffs

The Swiss National Bank (SNB) has sounded the alarm over escalating tariffs imposed by the United States, warning that the duties are a “major challenge” for Swiss exporters and will significantly slow economic growth in the coming years.

In its latest policy update on Thursday, the SNB held interest rates steady at 0%, a widely expected decision, but its tone was notably cautious. The central bank highlighted that Switzerland is grappling with some of the harshest tariff rates among European nations, with Washington imposing levies as high as 39% on certain Swiss goods since August.

The tariffs came after Swiss President Karin Keller-Sutter led a delegation to Washington, hoping to secure a bilateral trade agreement. Despite meetings with U.S. officials, including President Donald Trump, negotiations ended without a deal, leaving Switzerland exposed to stiff duties.

Economic Growth Forecast Downgraded

SNB Chairman Martin Schlegel emphasized that the tariffs will not only burden exporters but also ripple through the broader economy. “The U.S. tariffs present a major challenge for affected companies and are likely to dampen economic activity,” he said during a press conference.

Petra Schudin, another SNB governing board member, reinforced this outlook, noting that the economic forecast had “deteriorated due to significantly higher U.S. tariffs.” According to her, industries such as precision machinery, pharmaceuticals, and Switzerland’s iconic watchmaking sector will be hit the hardest.

As a result, the SNB now expects economic growth of just under 1% in 2026, down from its previous estimate of 1% to 1.5% made earlier in June. This revision underscores the toll the tariffs could take on one of Europe’s most stable economies, which traditionally posts growth rates between 1.5% and 2%.

Impact on Key Swiss Industries

Switzerland is highly dependent on exports, which account for nearly 65% of its GDP. The U.S. is its second-largest trading partner after the European Union, making the American market vital for Swiss businesses.

• Watchmaking Industry: The sector, valued at over CHF 23 billion annually, faces steep tariffs that threaten international demand for Swiss luxury timepieces, particularly in the U.S. market which represents around 15% of global watch exports.
• Machinery and Equipment: This sector contributes roughly CHF 90 billion to Swiss exports. Higher tariffs are expected to reduce orders from American buyers, directly affecting manufacturing hubs across the country.
• Pharmaceuticals: Switzerland’s largest export sector, generating more than CHF 120 billion annually, may also see reduced competitiveness in the U.S. if tariffs remain in place.

Economists warn that declining orders, combined with weaker foreign investment, could reduce Switzerland’s industrial output in 2025 and 2026 by as much as 0.5 percentage points.

Monetary Policy Response

While keeping interest rates at 0%, the SNB signaled readiness to intervene in foreign exchange markets to prevent the Swiss franc from appreciating further. A stronger franc would worsen the pain for exporters by making Swiss goods even more expensive abroad.

“Uncertainty about inflation and economic developments is still elevated. We will continue to monitor the situation and adjust our monetary policy if necessary, to ensure price stability over the medium term,” Schlegel said.

The central bank is also expected to maintain liquidity support measures for industries most affected by the tariffs.

Global Trade Context

Switzerland is not alone in facing tariff-related challenges. Several European countries have seen increased friction with Washington as the U.S. administration intensifies its protectionist stance. The Trump administration has already imposed tariffs on goods from Germany, France, and Italy, primarily targeting the automobile and luxury goods sectors.

For Switzerland, however, the impact is particularly severe given its reliance on specialized exports. With tariffs on precision instruments, luxury watches, and pharmaceutical products, Switzerland finds itself squeezed at a time when global trade growth is already slowing.

Outlook

Analysts now expect Switzerland’s export growth to remain flat over the next two years unless a breakthrough in trade talks is achieved. The SNB’s downgraded forecast for 2026 growth—just under 1%—reflects a sharp decline from the country’s historical performance.

The longer negotiations with Washington remain stalled, the more vulnerable Switzerland becomes to prolonged trade disruptions. For now, businesses across the country, from luxury watchmakers in Geneva to machine tool manufacturers in Zurich, are bracing for a leaner future under the shadow of U.S. tariffs.