Trade Tensions Test Swiss Resilience

🌍 Swiss Economy: Tariffs Weigh, Outlook Resilient

According to the SECO’s (Swiss State Secretariat for Economic Affairs) flash estimate, Swiss GDP growth slowed to 0.1% q/q in Q2 2025 from a robust 0.8% in Q1, after the US introduced 10% tariffs on Swiss goods in April. Manufacturing contracted, but resilience in services kept the economy in positive territory, better than many had expected.

🔑 Key drivers of the slowdown

• Tariffs are biting: The effective tariff rate on Swiss exports to the US rose sharply, with watches alone accounting for a third of the USD 500m duties collected in Q2.

• Trade balance shift: Switzerland’s surplus with the US flipped to a modest deficit, partly due to shifts in gold trade.

• Policy risk remains: The US has since raised tariffs to 39% as of August (excluding gold and pharma). Negotiations are still ongoing, leaving the outcome uncertain.

📈 Possible Scenarios

• Baseline: GDP growth at 1.3% in 2025 and 1.0% in 2026. Services, policy support, and structural resilience provide a buffer.

• Downside: If the 39% tariffs persist, growth could fall by up to 0.4pp, with exports to the US dropping around 25%.

• Upside: A negotiated reduction in tariffs by year-end could restore trade flows and support stronger growth momentum into 2026.

💡 Portfolio implications

For investors, this episode reinforces two lessons:

1. Diversification remains essential against unpredictable trade shocks.

2. Switzerland’s services, pharma, and luxury sectors continue to anchor stability.