Swiss economy forecast cut as US tariffs bite

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Switzerland’s economic outlook for 2026 has been recalibrated downwards by the nation’s government, with a significant factor identified as the punitive tariffs imposed by the Trump administration. These trade measures are creating substantial pressure on Swiss industries, particularly those heavily reliant on exports to the United States, which has historically been a primary market for Swiss goods. The revised forecast reflects a more cautious projection for economic expansion, signaling potential headwinds that could impact the broader economic landscape.

The government has lowered its growth forecast for the current year to 1.3%, a figure described as “significantly below-average” for the nation. Projections for 2026 have been further adjusted, with an anticipated Gross Domestic Product (GDP) growth rate of 0.9%, a reduction from the previously projected 1.2%. This downward revision underscores the tangible impact of the elevated U.S. tariffs, which officials explicitly stated have “further clouded the outlook for the Swiss economy.”

Switzerland, an economy deeply integrated into global trade, has faced considerable challenges due to recent trade policy shifts. A particularly impactful development occurred in August when Switzerland encountered tariffs as high as 39% on goods destined for the U.S., following unsuccessful negotiations with U.S. trade representatives. This placed key Swiss export sectors, including pharmaceuticals, watches, precious metals, and luxury goods, at a distinct disadvantage. Notably, branded and patented pharmaceutical products now face a substantial 100% tariff unless manufacturers establish or possess production facilities within the United States.

Trade Policy and Economic Repercussions

The prevailing trade policy environment is expected to result in only modest growth in global demand for Swiss products and services in the coming quarters. Swiss officials have articulated that the additional tariffs represent a “heavy burden” on affected sectors and export-oriented enterprises, with the potential for widespread economic ripple effects. This sustained uncertainty is also acting as a dampener on overall economic activity. Compounding these challenges, other trading partners have often secured more favorable tariff rates, placing Swiss exporters at a competitive disadvantage within the U.S. market. The government has indicated that a more favorable economic trajectory would be contingent on reaching an agreement with the U.S. or a general easing of international trade policies.

The Swiss Franc and Mounting Risks

Beyond trade-related pressures, the appreciation of the Swiss franc is also contributing to the nation’s economic complexities. The franc, typically viewed as a safe-haven asset, has seen a significant gain of over 12% this year amidst global uncertainty. This strengthening currency poses a challenge for the Swiss National Bank, exerting downward pressure on prices and complicating efforts to avoid disinflation and negative interest rates. Officials have cautioned that further appreciation of the franc is plausible, particularly if the international environment deteriorates. Persistent risks, including potential market corrections, global sovereign debt concerns, and geopolitical instability, could trigger additional upward pressure on the franc.

Charlotte de Montpellier, Senior Economist for France and Switzerland at ING, noted that risks to the Swiss economy are escalating. With the U.S. market representing a significant portion of Swiss GDP, the direct impact of the increased tariffs is estimated to be substantial. De Montpellier has revised her own growth forecast for Switzerland for 2026 to 0.8%, nearly halving her earlier projection. She believes that the balance of risks is tilted towards the downside, with a heightened probability of negative quarterly growth. This period of heightened uncertainty is anticipated to lead to a significant deceleration in the momentum of Swiss economic activity.

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