The 39-percent import duties that the United States will impose on Swiss imports from August 7th will have far-reaching consequences on Switzerland’s population.
When the US unveiled its latest list of tariffs on August 1st, Swiss President Karin Keller-Sutter said that the hefty customs duties “will certainly damage the economy.”
Other politicians also sounded the alarm along those lines.
“President Trump’s decision is a catastrophe and a direct attack on our prosperity,” the Liberal-Radical Party (PLR) said.
But while the exact extent of the potential damage is not yet known, these are some of the most likely consequences:
Thousands of job losses
In the worst-case scenario, “tens of thousands of jobs could be lost in Switzerland,” according to Urs Furrer, head of the Swiss Trade Association.
Export-oriented sectors — such as pharmaceuticals and watches, among others — will be hardest hit.
The reason is simple: as fewer Americans are able to buy Swiss goods that will become significantly more expensive, profits will stagnate, and companies in these at-risk industries will be obligated to lay off some of their workforce to compensate for material losses.
And that brings us to another, though closely related, consequence of higher tariffs:
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Wages
Companies that will no longer find a lucrative sales outlet for their products in the United States — and are no longer generating profits in that country — could be obliged to put salary increases on hold.
This would mean no pay raises and stagnating salaries.
Stock market
People who have money invested in the stock market, or other financial holdings, are suffering losses as well.
Two days after the tariff announcement, the Swiss stock market index (SMI) dropped more than 2 percent at opening.
The loss is even greater for Swiss companies like Logitech (3.7 percent), Swatch 3.2 (percent), and UBS (3 percent).
Which industries are hit the hardest?
Hans Gersbach, deputy head of the KOF Swiss Economic Institute, said the tariffs could cut the country’s annual growth by between 0.3 and 0.6 percent.
But it could be as much as 0.7 percent if the pharmaceutical industry, which has so far been exempt from tariffs, is targeted by Trump.
Pharmaceutical products account for more than half of Swiss exports, the economist noted.
Experts also say earnings for key sectors such as watchmakers could be hit substantially.
The chocolate industry association, Chocosuisse, said the tariffs were a “tough blow” for the sector, which is already reeling from a 10-percent duty.
“It is particularly shocking that Switzerland finds itself at a distinct disadvantage compared to all other Western industrialised countries,” it said in a statement, urging the government to continue negotiating.
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What’s next?
After it convened for an urgent meeting on August 4th, the Federal Council announced it would continue negotiating with the Trump Administration in an attempt to lower the tariffs before they can inflict serious damage on the Swiss economy.
Though it has not disclosed any details of how it intends to proceed, ministers said they are “determined to pursue discussions with the United States, if necessary, beyond the August 7th deadline.”
With reporting from AFP
