Key Takeaways
- The US’s unexpected 39% tariff on Swiss goods threatens Switzerland’s export-driven economy, especially luxury and tech, while pharmaceuticals remain exempt for now.
- Swiss stocks have rebounded since the announcement, with even the worst-hit names like Logitech rising in the weeks since.
- Markets expect a tariff deal, but prolonged measures — and possible future duties on pharma and gold — could hurt exporters and pressure the Swiss National Bank to act.
Swiss stocks face an uncertain future after the US’s shock Aug. 1 announcement of a sweeping 39% tariff on Swiss goods has plunged the Alpine nation into crisis mode. The measure - which took effect on Aug. 7 - targets nearly 60% of Swiss exports to the US, the country’s second-largest trading partner after the EU.
The Swiss government has ruled out countermeasures such as retaliatory tariffs, citing concerns over increased costs to businesses and consumers. In a last-minute diplomatic effort, Swiss President Karin Keller-Sutter and Economy Minister Guy Parmelin flew to Washington but returned empty-handed. Swiss stock prices and the franc initially weakened on the news, before recovering, with investors hopeful of a more amenable deal.
Why Is the Swiss Market So Calm?
Swiss stocks quickly rebounded from their initial declines following the 39% tariff threat, and have performed in line with their European peers in the weeks since.
Migros Bank says Swiss equities reacted surprisingly calmly to the tariffs taking effect on Aug. 7, which might be due to two factors: “First, the market still appears to expect a tariff deal in the coming days or weeks. Second, export-oriented small and medium-sized enterprises with mostly domestic production, which are typically not listed on the stock exchange, are more affected by the tariffs than large, globally diversified corporations. Accordingly, the performance of the Swiss SMI and SPI indexes is not an accurate reflection of the current situation.”
The Swiss bank expects high volatility in the coming weeks. “For the time being, shares of companies in the cyclical export sector are likely to remain under the most pressure. These include, first and foremost, companies from the machinery industry, the food sector, the chemicals industry, as well as the lower-priced segments of the luxury goods sector, particularly the watch industry”, according to a research note.
By contrast, companies with a high share of production in the US, such as Sika SIKA and ABB ABBN, and those for whom the US is not a key sales market, such as Geberit GEBN, are less impacted by the tariff turmoil.
Consumer and Tech Stocks Initially Hit Hardest by Tariff Shock
Consumer cyclicals lost the most value in the trading hours after the Aug. 1 announcement, followed by technology stocks and consumer defensives, Morningstar data show. Among Swiss stocks covered by Morningstar analysts, Logitech LOGN- a computer peripherals maker deeply integrated into US supply chains - was hit hardest on the first trading day after US President Donald Trump‘s tariff announcement. When Swiss markets reopened on Aug. 4, Logitech shares fell more than 5% intraday, compared with the July 31 close, before rebounding. The company generates a third of sales in the US, although that share should fall to 10% by year-end 2025, says Morningstar equity analyst Rob Hales.
Watchmaker Swatch UHR was the second-hardest hit. “Sales in North America were up double digits in the first half, signaling resilience in this market”, Morningstar equity analyst Jelena Sokolova says in a note on Aug. 4. “A proposed 39% tariff on Swiss imports could derail demand in this market but is not incorporated into our base-case assumptions, given other countries’ successful tariff reduction negotiations with the US.” Chinese demand, which accounts for 24% of revenue, is critical, she adds.
While Swatch continues to trade below its pre-tariff close, Logitech shares have rebounded and are up nearly 6% since.
Tariffs Could Cause Lasting Damage to Swiss Exporters
In a client note, UBS strategists warned that the 39% tariff could have far-reaching implications for Swiss exporters. “This puts Swiss companies at a significant competitive disadvantage, especially in export-oriented sectors like watches, machinery, and precision instruments. While pharmaceuticals - making up around 60% of Swiss exports to the US - are currently exempt, the situation remains fluid and subject to further US policy changes.” Swiss companies generate 90% of revenue abroad and one-third in the US.
UBS maintains a base-case assumption of a negotiated compromise, but cautioned that Swiss equities will “likely feel some pressure”. The earnings impact should be manageable for most large firms, though smaller, export-reliant companies are more vulnerable. In a risk scenario where tariffs persist, UBS warns Swiss exporters could lose market share to EU competitors and see weaker investment conditions.
“The world economy is increasingly being held hostage to US trade policy,” says Karsten Junius, chief economist at J. Safra Sarasin. “It has been treated much worse than the EU, despite the seemingly solid relations with the US and a widely held belief that not being a member of the EU is economically advantageous for Switzerland.”
He expects higher tariffs to weigh on global production data, with Switzerland among the hardest hit. According to Junius, the Swiss export model faces a serious test: higher costs are likely to erode price competitiveness in the US market, particularly in discretionary goods such as luxury watches and food products, where international substitutes abound. Even the highly profitable pharma sector, so far exempt, may not be spared - and could become a bargaining chip in future negotiations, he says.
Switzerland’s Two Most Important Export Sectors Face Different Woes
Gold and pharmaceuticals, Switzerland’s two most important export sectors, face very different tariff threats.
While Switzerland’s two drug manufacturing giants, Novartis NOVN and Roche ROG, are exempt from this round of tariffs, the US president is contemplating imposing much heavier duties on the sector. Donald Trump sent letters to 17 drugmakers with an ultimatum to reduce drug prices by September, insisting that the firms sell new drugs to the US at the lowest prices of any developed country.
“The greater significance relating to the stance on Switzerland could portend toward what can be expected with respect to upcoming tariffs, on the pharmaceutical sector”, says Mark Dowding, fixed income CIO at RBC BlueBay Asset Management. “In this context, Trump has floated the idea of an initial tariff of 25%-50% on pharma imports, with this potentially rising to 150% or more over the next 18 months. We think an announcement of a section 232 tariff is probably due in the next couple of weeks and this could be the driver of some market volatility in an otherwise quiet month.”
Meanwhile, Switzerland could also be hurt by the U.S. Customs and Border Protection’s surprise ruling to impose heavy tariffs on one-kilo and 100-ounce gold bars - a move that contradicts earlier White House assurances - given the country’s status as the world’s largest gold-refining hub. But on Aug. 11, Trump said gold will not be subject to tariffs.
How Will the Swiss National Bank React to Tariffs?
Despite the looming risks, J. Safra Sarasin’s Junius expects no immediate monetary policy response from the Swiss National Bank, given still-positive inflation trends and the reputational risks of cutting rates into negative territory. A shift in interest rates or foreign exchange intervention remains unlikely in the short term, he says. However, if tariffs remain in place into year-end, the chances of a sharper policy move in December could rise.
Likewise, UBS sees no immediate need for the SNB to cut interest rates. The bank expects the SNB to hold its policy rate at 0% until next year. “If tariffs persist, the SNB may consider further easing to cushion the economy and might aim for a higher EUR/CHF exchange rate, but we think Switzerland would avoid a recession.”
Going forward, much will depend on whether Bern can secure exemptions in the coming weeks, and whether Washington follows through on threats to target pharmaceuticals. If tariffs persist into year-end, pressure on the Swiss economy, and monetary policymakers, will mount.
