Lower lock wooden bridge in Thun, Switzerland.
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The Swiss government on Thursday lowered its economic forecast for the country for 2026, calling the Trump administration’s tariffs a “severe burden” on its industries.
Officials stuck to their forecast that the Swiss economy would grow by 1.3% this year, but noted that this economic growth would be “well below average” for the country. Next year, they now forecast gross domestic product (GDP) growth will slow to 0.9% – down from a previous forecast of 1.2% for 2026.
“Higher U.S. tariffs have further clouded the outlook for the Swiss economy,” officials said in a news release Thursday.
Switzerland is an export-oriented economy, and the United States was the most important foreign destination for its goods in 2024. Back in August, Switzerland was hit with 39% tariffs on goods shipped to the US after a Swiss delegation failed to reach an agreement with US officials – one of the highest country-specific rates imposed by the Trump administration.
The country’s largest exports include watches, pharmaceuticals and precious metals – but the country is also known for its luxury goods, chocolate and skin care products. Branded and patented pharmaceutical products are now subject to 100 percent tariffs when entering the USA, unless their manufacturers have or are currently building production facilities in America.
Switzerland is in a uniquely difficult position when it comes to tariffs. Here’s why
Swiss officials said in Thursday’s update that global demand for Swiss goods and services is expected to increase “only moderately” in the coming quarters under current trading conditions.
“The current trade policy environment presents Switzerland with particular challenges,” they said. “The additional tariffs place a heavy burden on the affected industries and export-oriented companies and are expected to have a significant impact on the overall economy. In addition, the ongoing uncertainty is also slowing economic activity.”
The government also warned that most of America’s other trading partners had been granted lower tariff rates, putting Swiss exporters at a competitive disadvantage in the US market. They said the White House’s trade policy would have a significant impact on the future development of the Swiss economy.
“If Switzerland were to reach an agreement with the USA or if international trade policy were to relax, a more favorable development would be expected,” it said. “Overall, however, downside risks currently dominate.”
Beyond Trump’s tariffs, demand for the Swiss franc is also contributing to Switzerland’s economic and diplomatic woes, as the currency – usually seen as a safe haven during times of general volatility – has gained more than 12% this year amid ongoing uncertainty. The rising franc has created headwinds for the country’s central bank by putting downward pressure on prices as policymakers struggle to avoid disinflation and negative interest rates.
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Officials said Thursday that the Swiss franc continues to play a role in Switzerland’s economic challenges – and warned that further appreciation of the franc is possible.
“A deterioration in the international environment cannot be ruled out,” they said, noting that risks related to a market correction, global sovereign debt and the geopolitical landscape remain.
“Should any of these risks materialize, further appreciation pressure on the Swiss franc would be expected,” they said.
The risks are increasing
Charlotte de Montpellier, senior economist for France and Switzerland at ING, told CNBC on Thursday that “the risks to the Swiss economy are increasing.”
“Its exposure to the U.S. market is large, amounting to 4% of GDP,” de Montpellier said in an email. “I estimate the cumulative direct impact of the current US tariff increase to 39% on Swiss GDP to be around 0.86% in the first two years.”
De Montpellier recently revised down its own growth forecast for Switzerland for 2026 to 0.8% – almost half the growth rate it forecast earlier this year.
“I believe the risk is trending to the downside and the likelihood of a negative growth quarter has increased sharply,” she said. “The Swiss economy, which has long been supported by pharmaceutical exports, is now facing a phase of increased uncertainty that will lead to a sharp slowdown in economic momentum.”
The Swiss franc’s status as a safe haven is a headache for the nation
Melanie Debono, senior European economist at Pantheon Macroeconomics, said on Thursday that the Swiss government’s new forecasts are in line with her own.
“A decline in merchandise exports, as shown in the monthly nominal merchandise trade figures, coupled with falling investment – despite increasing uncertainty [Swiss National Bank] Interest rate cuts – which will ultimately translate into lower interest rates for companies – mean we expect the Swiss economy to enter recession in the second half of this year,” she told CNBC via email. “We expect Swiss GDP to fall 0.2% quarter-on-quarter in both the third and fourth quarters.”
“Terrible news” for companies
Speaking to CNBC’s Carolin Roth on Wednesday, Georges Kern, CEO of Swiss luxury watchmaker Breitling, called the U.S. tariffs “terrible news” for Switzerland.
“Tariffs of 39% are terrible,” he said. “Still, I believe it will be solved. Swiss politicians really know how to deal with business people. The Trump administration, they are business people, they are not classic politicians… But I am confident that in the next few weeks there will be a much better solution than the 39%.”
Kern said that as tariffs took effect, Breitling increased prices worldwide to offset the impact, noting that luxury brands had more flexibility in this regard.
“[In] In the US we increased prices by 4%, but also globally to offset the cost of the tariffs, because you can’t just increase prices for the consumer by 39%,” he explained. “Thank God we have some pricing power in our price segment, I don’t think it will have a dramatic impact on us, in fact we are growing.”
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