Government will continue to negotiate with the US to strike a better tariff deal; Switzerland faces a risk of recession; and other news in our roundup on Friday.
‘Further negotiations’: What’s next for Switzerland after the failed tariff reduction attempt?
President Karin Keller-Sutter and Economy Minister Guy Parmelin returned from Washington on Wednesday, having failed to secure a better tariff deal with the United States.
This means that the 39-percent customs duties on Swiss imports, which went into effect yesterday, remain in place.
But even defeated, Switzerland “remains firmly committed to pursuing discussions with the US with the aim of reducing these tariffs as swiftly as possible,” the Federal Council said on Thursday.
It added that the government “remains determined to find a solution that will lead to the prompt removal” of the hefty tariffs.
“Trade tensions are not in Switzerland’s interest,” the Federal Council added. “At present, countermeasures in response to the US tariff increases are not being considered, as they would impose additional costs on the Swiss economy.”
In the meantime, the government “will support sectors affected by additional tariffs, and generally ease the burden on companies.”
‘A risk of recession’ looms for Switzerland
Switzerland’s famously strong economy could shrink as a result of high customs, according to the Swiss Economic Institute (KOF).
That’s because “tariffs harm trade relations between Swiss and American companies and, in many cases, completely shut them down,” said KOF economist Hans Gersbach.
“If supply chains collapse and have to be rebuilt, this could cause the GDP to drop — a 0.6-percent decline that would represent a loss of around 600 francs per capita.
But the scenario could get even worse.
“If Swiss pharmaceutical products were to be taxed at a rate of 39 percent too, there would be a real risk that Switzerland will enter a recession.” he said.
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But there’s good news as well: Swiss stock market has resisted the tariff blow
The Swiss Market Index (SMI), which includes the country’s 21 largest listed companies, rose around 0.5 percent at opening time on Thursday, when the new customs duties kicked in.
The broader Swiss Performance Index (SPI) gained as much as 0.7 percent; by midday, the gain was even greater.
One of the reasons for this positive development is that, for the moment at least, the pharmaceutical industry has been spared the 39-percent tariff.
If, however, these companies were to be included in the new customs duties, the potential drop in Swiss GDP could exceed 1 percent, economists believe.
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Swiss Post will not increase its prices
Despite its plans to raise the prices of its services by around 70.1 million francs in 2026, the cost of A- and B-mail letters, as well as those of Priority parcels, will not go up after all.
The reason: after “intense negotiations” between the Swiss Post and the Office of Price Watchdog, most of the planned increases will not be implemented next year.
READ ALSO: How Switzerland’s price watchdog can help you save money
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