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 can 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 appears to stay unrequited. The prospect for mutual admiration ended abruptly on Aug. 1, when the Trump administration levied a surprising 39 % tariff fee 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 considered one of “whole disaster.” The Swiss authorities, during which Keller-Sutter’s right-leaning Swiss Folks’s Social gathering at present holds a legislative majority, was blindsided. The alpine nation has change 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 the US soared as traders 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 % fee, despite the fact 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 likely one of the most export-dependent economies in Europe, with outgoing commerce accounting for over 70 % of GDP, properly 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 overseas markets. Its highly-educated and world inhabitants, moreover, permits it to concentrate on producing items with high-value add, resembling prescribed drugs, industrial chemical substances, and, in fact, 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, the US, with its 18 % share, is an in depth second—and in 2021 turned Switzerland’s prime export marketplace for items. Till lately, strong commerce relations with the US had been seen as a fallback possibility, a means of diversifying Switzerland’s dependence on the EU and justifying its longstanding resolution to maintain aloof of EU-based market guidelines and laws.
That dynamic has out of the blue 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 might curtail its personal capacity to draw overseas funding, and values state subsidies incompatible with membership to the European Financial Space. The latest spherical of bilateral negotiations, concluded in December final 12 months, led to contentious and taxing home debates, particularly over immigration. In October 2024, simply 37 % of the inhabitants felt relations with the EU should be nearer.
The blow of the tariffs, nonetheless, has out of the blue made the prospect of aligning with Brussels rather more enticing. As soon as some extent of delight, Switzerland’s historic aloofness to the European venture out of the blue appears like its biggest 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 Social gathering. Lengthy a minority place, it has out of the blue “change into fairly apparent that sustaining the sovereignty of Switzerland does imply having extra integration to the European venture,” he mentioned.
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 should be handled no in another way from the European market in relation to tariffs.
The unsure geopolitical surroundings, 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 means of coordinating like-minded states and blocs to attempt to assemble some form of new alliance in opposition to this authoritarian disadvantage that we don’t solely see, in fact, within the U.S. It’s additionally in Moscow, Bejing, it’s in Delhi,” Wermuth mentioned. “The one factor that’s left is sort of clearly Brussels.”
Simon Evenett, a professor of geopolitics and technique on the Worldwide Institute for Administration Improvement in Lausanne, agreed that Switzerland was uniquely susceptible to the tariffs however pointed to totally different causes. Moderately than looking for to combine with the EU or equally bureaucratic blocs, international locations ought to be taught to higher interpret the alerts popping out of Washington—and replace their negotiating methods accordingly.
The tariffs, for instance, had been by no means about commerce negotiations, he mentioned, however geopolitical positioning used to advertise American priorities. From this view, Switzerland’s latest free commerce settlement with China, for instance, as a consequence of take impact this 12 months, or its low ranges of funding in the US 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 slightly than a truce, which simply places tariffs in place till the U.S. president decides to vary them once more.”
As for speeding into relations with the EU, post-Brexit U.Ok. 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 mentioned.
The instant outlook for the Swiss financial system is much less doomsday than the preliminary media frenzy steered. There’s cause to count on the tariffs might be diminished in additional rounds of negotiations late this 12 months 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 almost $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 enhance their attract.
The remaining sectors uncovered to tariffs—specifically equipment, Nespresso pods, and medical units—pose extra restricted injury to the Swiss financial system. The estimated contraction to GDP at present stands at 0.3 % to 0.6 %.
“I think on the finish of the 12 months we are going to take a look at this as a foul 12 months for Swiss commerce, however not a catastrophic 12 months,” Evenett mentioned.
Nonetheless, the shock of the tariffs has been a a lot larger blow to nationwide delight and id 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 Social gathering have lengthy held an affinity for the US. For them, the tariffs strike at a basic ideological kinship.
“There’s a very particular, let’s say, historic feeling in Switzerland that we take into account ourselves form of a sister republic of the US of America,” Wermuth defined. “It’s a really basic shock, no less than for conservative and right-wing politicians, to be form of upset by the sister republic. And that’s one thing that goes into the very coronary heart of Swiss id.” He added: “That’s a part of why we at all times noticed ourselves as form 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 want to put its personal preferences first. However in a world with out compromise, going it alone means adopting the preferences of the robust.
