The unexpected election of Donald Trump as next President of the United States has created a sense of unease among the Swiss business community about the long-term prospects in their second-biggest market.
Trump’s election campaign was peppered with protectionist trade ideology and promises to guard US jobs against foreign competition. Companies now face an anxious few weeks, or even months, before they know if his provocative talk will translate into policy.
“The election result is certainly not good news for Swiss business,” Martin Naville, chief executive of the Swiss-American Chamber of Commerce, told swissinfo.ch.
“Swiss companies are not on the frontline of any potentially adverse Trump trade policies. But he has spoken of imposing taxes on Chinese and Mexican goods and pulling out of trade agreements and the WTO (World Trade Organization). If the US starts to adopt a protectionist trade strategy, Switzerland would certainly feel the knock-on effects and suffer damage.”
The initial shock of the election result was short-lived in the Swiss markets. The benchmark SMI index fell sharply but swiftly recovered as investors put their money into Swiss blue-chip company stocks.
The franc spiked in value against the dollar before settling back to the pre-election exchange rate. This led observers to believe that the Swiss National Bank had lived up to its recent promise to defend the franc against post-election volatility.
The Swiss Business Federation, economiesuisse, believes that the short-term effects of Trump’s accession to power will be largely benign. But Jan Atteslander, the lobby group’s foreign affairs specialist, is – like Naville – less certain about the more distant horizon.
“Companies do not desert one of the biggest economies in the world because of yesterday’s election,” Atteslander said. “We need more time for the dust to settle and clear policies to emerge from the Trump administration.”
"A clearer picture of whether Trump will carry out his protectionist threats will have to wait a few months. A first test will be the ratification of the Trans-Pacific Partnership (TPP).”
Swiss firms have every reason to follow Trump’s every word in the coming weeks. The US is Switzerland’s second-largest trading partner, receiving Swiss exports worth CHF27.4 billion ($28 billion) last year. The US has also proven a rock for exporters in recent years, given the economic woes in Europe and the more recent slowdown of emerging economies.
“We cannot be certain of anything at this stage, but there is a possibility that the climate for investments could become tougher in the US or that the dollar will weaken,” said Ivo Zimmermann, spokesman for the Swissmem lobby group representing Swiss manufacturers.
The Swiss watchmaking industry also had its eye on exchange rates, but was more concerned about the huge fall of the peso in Mexico, a country that could bear the brunt of Trump’s protectionist trade policies.
Words louder than action?
The chances of the US reinforcing its borders against foreign trade competition could come down to the strength of business lobby groups and Trump’s economic advisors, according to Jan Atteslander.
“Once Donald Trump leaves his campaign office to move into the executive office, he will be confronted with hard economic facts that do not change – whoever is sitting in the Oval office,” he said. “It is clear that protectionist policies destroy far more jobs and economic value than they create.”
Martin Naville echoed this sentiment. “Until now, all speech has been free during the election campaign,” he said. “We don’t yet know what Trump will do as president. Hopefully he will understand the importance of realpolitik and that people around him can persuade him not to do all the things he talked about during his campaign.”
Swiss trade to the US has comfortably outperformed global trade in the last 18 months.
For 2015 as a whole, exports to the US rose 6% (global -2.6%) to CHF27.4 billion. Imports rose 6.8% to CHF11.7 billion (-6.8% worldwide).
The trend has continued in the first eight months of this year. Exports to the US have gained 17% on the same period in 2015 and imports 27.6%. By comparison, global exports rose 4.7% and imports 4.8%.