Switzerland readies ‘more attractive offer’ as shares hit by Trump tariff

Zurich — The Swiss government is ready to make a “more attractive offer” in trade talks with Washington, the cabinet said on Monday, after a crisis meeting aimed at averting a 39% US tariff on Swiss imports that could hammer the export-driven economy.

The Federal Council it was determined to pursue discussions with the US, if necessary beyond the August 7 deadline that US President Donald Trump has set for the tariff to come into effect.

“Switzerland enters this new phase ready to present a more attractive offer, taking US concerns into account and seeking to ease the current tariff situation,” it said in a statement.

The statement did not give any details on what the Swiss government may offer.

Switzerland was left stunned on Friday after Trump hit the country with one of the highest tariffs in his global trade reset, with industry associations warning that tens of thousands of jobs were at risk.

The duties are scheduled to go into effect on Thursday, giving the country, which counts the US as its top export market for pharmaceuticals, watches, machinery and chocolates, a small window to strike a better deal.

The White House said on Friday it had made the move because of what it called Switzerland’s refusal to make “meaningful concessions” by dropping trade barriers, calling the two nations’ current trade relationship “one-sided”.

Swiss industry leaders and politicians, however, have struggled to understand why the country was singled out.

Trump has stated that he is seeking to rebalance global trade, claiming that current trade relations are stacked against the US. And Switzerland had a Sf38.5bn ($48bn) trade surplus with the US last year.

But Swiss President Karin Keller-Sutter said Switzerland had given US goods virtually duty free access to its market, and Swiss companies had made important direct investments in the US.

“The president (Trump) is really focused on the trade deficit, because he thinks that this is a loss for the United States,” she said.

The EU, Japan and South Korea, which have negotiated 15% tariff rates with Washington, all have larger trade surpluses with the US — about $235bn for the EU, $70bn for Japan and a nearly $56bn surplus for South Korea.

The cabinet said in its statement it was committed to securing fair treatment compared with its key competitors and that it was not considering any countermeasures.

Economic damage

Swiss business minister Guy Parmelin had said over the weekend the government was open to revising its offer to the US in response to the tariff rate.

He said options included Switzerland buying US liquefied natural gas or further investments by Swiss companies in the US.

The new tariff rate — up from an originally proposed 31% tariff that Swiss officials had already described as “incomprehensible” — would deal a major blow to Switzerland’s export-focused economy.

Swiss economic output would be reduced by 0.3% to 0.6% if the 39% tariff was imposed, said Hans Gersbach, an economist at ETH, a university in Zurich. That figure could rise above 0.7% if pharmaceuticals, which are not covered by the US import duties, are included.

Prolonged disruptions could shrink Swiss GDP by more than 1%, Gersbach said.

The tariffs could also see the Swiss National Bank cut interest rates in September, according to Nomura.

An index of Swiss blue-chip stocks briefly hit its lowest since mid-April, as shares in banks, luxury retailers and pharma companies tumbled. The SMI index was last down 0.6% on the day, compared with a 0.6% rise in the regional Stoxx 600 index.

In Zurich, shares in high-end watchmakers such as Richemont and Swatch fell in volatile trading.

Richemont stock was last down 1.5%, having dropped as much as 3.5% earlier, while Swatch shares were down 1.8%, having fallen by as much as 5%.

On Monday, the Swiss franc was the worst-performing major currency against the dollar, which was last up 0.4% at 0.8073 francs, not far off Friday’s one-month highs.

Reuters