A tense phone call between Swiss President Karin Keller-Sutter and US President Donald Trump on July 31st has escalated tensions over tariffs and investments. The conversation ended abruptly after Trump found Switzerland's proposed deal insufficient, citing a $39 billion trade deficit. This call preceded the US announcement of a 39% tariff on most Swiss exports, confirmed on August 1st.

According to reports, Keller-Sutter attempted to de-escalate the stalled conversation, but Trump's response was curt, stating he would speak with his aides – not with US Trade Representative Jamieson Greer, whom he "doesn't care about." The Swiss President's request not to announce sanctions on the national holiday, August 1st, also went unanswered. Washington disconnected the call at 8:44 PM, and by 8:45 PM, confirmed the imposition of the 39% tariff. Almost simultaneously, SECO Director Helene Budliger Artieda received a text from Greer's circle strongly recommending ending the conversation, suggesting the US side realized the situation was deteriorating.

Market Signals

Broad Tariff Impact: The US has imposed a 39% tariff on most Swiss exports, placing Swiss companies at a disadvantage compared to EU or Japanese competitors.
Key Sectors Affected: These include watches and luxury goods, pharmaceuticals (facing threats of higher tariffs), industrial machinery, precision instruments, gold and precious metals, and chocolate and cheese.
GDP Impact: Economists estimate tariffs could reduce Switzerland's GDP by 0.3-0.6%, with a potential annual decline of 1-2% if the pharmaceutical sector is also targeted.

Winners & Losers

Winners: US Treasury, competitor nations with favorable trade agreements with the US, and destinations like India and Vietnam benefiting from production relocation. Losers: Swiss exporters (especially SMEs), the Swiss economy, Swiss consumers (indirectly), the Swiss watchmaking sector, and Swiss gold refiners.

Action Timeline

Immediate (24-48h): Explore hedging and inventory management options, seek alternative markets to offset losses.
Short-term (1-2 weeks): Begin implementing supply chain diversification strategies, evaluate options for relocating production to tariff-resilient regions.
Long-term: Forge strategic alliances with the EU, restructure global supply chains.

Risk Assessment

Regulatory Risks: Imposition of additional or higher tariffs by the US, particularly on the pharmaceutical sector.
Market Volatility: Increased volatility in stock markets, commodity prices (like gold), and currency exchange rates.
Supply Chain Disruptions: Delays, shortages, and higher costs due to tariffs.
Loss of Competitiveness: Swiss companies risk losing market share.

Key Indicators

US Tariffs: Signal a broader shift in global trade dynamics towards protectionism.
Sectoral Impacts: Illustrate the extent of tariff effects on key industries like watches and pharmaceuticals, impacting corporate earnings.
GDP Forecasts: Anticipated decline in Swiss GDP could lead to economic slowdown.

Regional Perspective

These developments highlight the vulnerability of the highly export-oriented Swiss economic model to US protectionist measures. The legal "Swiss-Made" constraint limits relocation options for Swiss watchmakers.

Immediate Implications

Impact on Profit Margins: Swiss companies, particularly in the watch sector, are facing an erosion of profit margins due to high tariffs.
Investment Opportunities: Investors are advised to consider ETFs tracking emerging hubs and companies with diversified production facilities.

What to Watch

Ongoing Negotiations: Switzerland's continued efforts to seek negotiated solutions with the US.
Pharmaceutical Sector Status: Any future US decisions on tariffs for pharmaceutical imports.
Company Adaptations: Monitoring Swiss companies' diversification strategies and production relocations.
Political Developments: Any shifts in US trade policy.

Analysis

This incident reflects escalating tensions in global trade, with the US employing tariffs as a negotiation tool. Switzerland's reliance on external markets makes it particularly vulnerable to these policies, necessitating rapid strategic adaptation.