It ought to have been a match made in heaven: Switzerland refines a 3rd of the world’s gold provide; U.S. President Donald Trump, in his first six months in workplace, has plated the West Wing in gilded collectible figurines, frames, Rococo mirrors—and even furnished a golden TV distant.
As lately as February, moreover, you could possibly discover Switzerland’s Euroskeptic authorities praising the Trump administration’s populist rhetoric on the Munich Safety Convention, the place present President Karin Keller-Sutter, deemed U.S. Vice President J.D. Vance’s alliance-shattering speech “very Swiss.”
Unluckily for Switzerland, the romance seems to be to stay unrequited. The prospect for mutual admiration ended abruptly on Aug. 1, when the Trump administration levied a stunning 39 % tariff charge in opposition to Swiss exports, greater than twice the 15 % negotiated by the European Union earlier this summer time, and surpassed solely by the 40 % focused at international locations like Laos, Myanmar, and Syria.
The temper amongst watchmakers, reported the Zürich-based newspaper NZZ, was one among “complete disaster.” The Swiss authorities, through which Keller-Sutter’s right-leaning Swiss Folks’s Get together at the moment holds a legislative majority, was blindsided. The alpine nation has develop into the newest object lesson within the pitfalls of going it alone in an unpredictable, geopolitically fractious second.
There are a number of ranges of irony at work in Switzerland’s misfortune. After Trump took workplace, gold exports to america soared as buyers tried to insulate themselves from the market chaos of the approaching commerce wars. The gold rush, pushed by Trump’s personal erraticism, artificially inflated the commerce deficit to what the administration claimed to be a $40 billion excessive—a questionable quantity that excludes commerce in companies. (Trump’s deficit calculations exclude commerce in companies for all international locations, however in Switzerland’s case, the inclusion would reduces the hole to $9 billion.) This $40 billion was used to compute the 39 % charge, regardless that the monetary gold commerce contributes solely negligibly to the GDP of both nation.
However there are different causes Switzerland discovered itself uniquely susceptible to tariffs, and to the isolationist impulses that lie behind them.
Switzerland is among the most export-dependent economies in Europe, with outgoing commerce accounting for over 70 % of GDP, effectively above the worldwide common of 30 %. Its export dependency is because of its small home inhabitants and, consequently, an aggressive pursuit of commerce agreements that assure entry to international markets. Its highly-educated and international inhabitants, moreover, permits it to give attention to producing items with high-value add, equivalent to prescribed drugs, industrial chemical compounds, and, after all, its well-known watches.
Whereas the European Union is by far Switzerland’s largest buying and selling companion by quantity, accounting for over half of all exports, america, with its 18 % share, is a detailed second—and in 2021 turned Switzerland’s prime export marketplace for items. Till lately, strong commerce relations with america had been seen as a fallback choice, a method of diversifying Switzerland’s dependence on the EU and justifying its longstanding choice to maintain aloof of EU-based market guidelines and rules.
That dynamic has all of the sudden reversed.
For the previous decade, nearer integration with the European Union has remained an especially fraught matter in Switzerland, serving as a 3rd rail in home politics. The small, rich nation prizes its sovereignty, fears a creeping forms that would curtail its personal capability to draw international funding, and values state subsidies incompatible with membership to the European Financial Space. The newest spherical of bilateral negotiations, concluded in December final yr, led to contentious and taxing home debates, particularly over immigration. In October 2024, simply 37 % of the inhabitants felt relations with the EU must be nearer.
The blow of the tariffs, nevertheless, has all of the sudden made the prospect of aligning with Brussels rather more engaging. As soon as a degree of delight, Switzerland’s historic aloofness to the European venture all of the sudden seems to be like its best legal responsibility.
Amongst those that have lengthy argued for a cozier relationship with Europe is Cédric Wermuth, co-leader of the center-left Social Democratic Get together. Lengthy a minority place, it has all of the sudden “develop into fairly apparent that sustaining the sovereignty of Switzerland does imply having extra integration to the European venture,” he stated.
EU integration doesn’t essentially imply membership, nor even—the final word taboo—integrating business markets. But nearer alignment in much less contested sectors like safety and power would have made it simpler to argue that the Swiss must be handled no in another way from the European market on the subject of tariffs.
The unsure geopolitical setting, moreover, will prolong far past the instant horizon of tariff negotiations, demanding tactical changes for the lengthy haul. In a world the place the liberal authorized order has damaged down, small states pay the value. “We should discover a method of coordinating like-minded states and blocs to attempt to assemble some sort of new alliance in opposition to this authoritarian disadvantage that we don’t solely see, after all, within the U.S. It’s additionally in Moscow, Bejing, it’s in Delhi,” Wermuth stated. “The one factor that’s left is kind of clearly Brussels.”
Simon Evenett, a professor of geopolitics and technique on the Worldwide Institute for Administration Growth in Lausanne, agreed that Switzerland was uniquely susceptible to the tariffs however pointed to totally different causes. Fairly than searching for to combine with the EU or equally bureaucratic blocs, international locations ought to be taught to higher interpret the indicators popping out of Washington—and replace their negotiating methods accordingly.
The tariffs, for instance, had been by no means about commerce negotiations, he stated, however geopolitical positioning used to advertise American priorities. From this view, Switzerland’s current free commerce settlement with China, for instance, on account of take impact this yr, or its low ranges of funding in america in comparison with the EU, are vulnerabilities. Says Evenett, “The Swiss in all probability thought in additional legalistic phrases that this was a commerce deal which might stick somewhat than a truce, which simply places tariffs in place till the U.S. president decides to alter them once more.”
As for dashing into relations with the EU, post-Brexit U.Okay. negotiated 10 % to the EU’s 15 %. “We must always not let the advocates of becoming a member of forces with the EU rewrite historical past right here,” he stated.
The instant outlook for the Swiss economic system is much less doomsday than the preliminary media frenzy instructed. There’s cause to anticipate the tariffs can be diminished in additional rounds of negotiations late this yr or early subsequent. Gold has already been exempt; prescribed drugs had been by no means included, although the trade faces separate negotiations on drug pricing. (In anticipation, Swiss-based pharma giants Roche and Novartis have collectively pledged practically $75 billion in investments in U.S.-based manufacturing websites.)
As for luxurious items like Rolex watches, elite clients usually tend to settle for increased costs, which can even improve their attract.
The remaining sectors uncovered to tariffs—specifically equipment, Nespresso pods, and medical units—pose extra restricted harm to the Swiss economic system. The estimated contraction to GDP at the moment stands at 0.3 % to 0.6 %.
“I think on the finish of the yr we’ll have a look at this as a foul yr for Swiss commerce, however not a catastrophic yr,” Evenett stated.
Nonetheless, the shock of the tariffs has been a a lot better blow to nationwide delight and identification and would require long-term soul-searching about how Switzerland needs to conduct itself in a geopolitically fractured world. Conservative factions just like the Swiss Folks’s Get together have lengthy held an affinity for america. For them, the tariffs strike at a elementary ideological kinship.
“There’s a very particular, let’s say, historic feeling in Switzerland that we contemplate ourselves sort of a sister republic of america of America,” Wermuth defined. “It’s a really elementary shock, at the very least for conservative and right-wing politicians, to be sort of dissatisfied by the sister republic. And that’s one thing that goes into the very coronary heart of Swiss identification.” He added: “That’s a part of why we at all times noticed ourselves as sort of the Individuals in Europe, not being European.”
The geopolitics of the “America First” period show that, amongst isolationists, such ideological affinities are not often reciprocated. Each nation wish to put its personal preferences first. However in a world with out compromise, going it alone means adopting the preferences of the robust.
