Trump’s tariffs expose weakness of Switzerland’s economic independence

Keystone / Alessandro Della Valle

It’s not often that Switzerland finds itself at the sharp end of a global trade dispute. Even less often is it singled out with punitive action from a major trading partner. But this month, the US imposed a 39% tariff on most Swiss goods after a seven-day grace period lapsed.

It is a rate more than double that of the one levied by the Trump administration on the EU, and far steeper than those applied to the UK or Canada. In fact, it is the highest tariff on any developed country.

Recriminations and deliberations are now sweeping Switzerland as the government plots its next move. Last week, Bern vowed to continue discussions with Washington.

It is rare to have so much international news about this small, export-reliant country of nine million people – especially on trade.

The surprise wasn’t that the US took action. Few foreign partners have escaped the levies driving President Donald Trump’s economic agenda. Switzerland, having a CHF48.5 billion ($60 billion) goods surplus with the US in 2024 and importing limited American goods in return, had long been a target.

But few in Bern expected the severity of the outcome: a flat 39% tariff across nearly all product groups, with only a narrow band of exemptions. Because of those carve-outs – particularly for gold and pharmaceuticals – Switzerland faces an effective average tariff of slightly more than 12%. But key exports such as watches, machinery, industrial tools and chocolate were affected immediately. 

Even the exceptions are unclear. Gold was meant to be one such export mostly exempted. But last week the Financial Times reported that the US imposed tariffs on imports of 1kg gold bars, in a move that dealt a fresh blow to Switzerland, the world’s largest refining hub.

What makes the measures so notable is that Switzerland appears to be alone. The EU negotiated a 15% average rate. The UK secured 10%. Even Taiwan, heavily reliant on US trade and diplomatically fragile, managed a cap of 20%, with exemptions set to be phased in.

So why is Switzerland being singled out?

A structural vulnerability

Yes, Switzerland ran a large trade surplus with the US last year. But the country had already abolished virtually all industrial tariffs as of January 2024. Most of its recent trade surplus came from gold and pharmaceuticals – and the imbalance was greatly distorted by stockpiling earlier this year. Not only that, US data shows the bilateral balance briefly flipped into a US surplus in April and May, as companies wound back their accumulation of emergency supplies. 

The answer, some in Bern suggest, is not what Switzerland did – but what it cannot do.

First, Switzerland negotiates from a place of institutional constraint and realism. The Swiss government typically makes offers it can fulfil – often tied to what is politically and constitutionally possible. That stands in contrast to more expansive political promises made by larger actors, such as the EU’s $750 billion US energy investment pledge.

“Switzerland has a reputation for delivering on its commitments. But that can be a weakness in a world that rewards drama and ambition,” says Hans-Peter Portmann, a Swiss banking executive and politician serving in the country’s House of Representatives. “That’s a problem when you’re up against Trump.”

Swiss diplomacy is also hindered by structural features: a seven-member Federal Council with a rotating presidency, direct democracy mechanisms that can force referendums on key issues, and a tradition of neutrality that limits geopolitical leverage.

“The Swiss president cannot unilaterally offer $30 billion in investment or agriculture access without risking a domestic political backlash or a vote,” he adds. “And the government cannot pledge private sector action in the way other states might.”

Unlike the EU or Japan, Switzerland lacks the market size to retaliate meaningfully. It cannot dangle defence co-operation or energy market integration as negotiating chips. And its unwillingness – or inability – to bend its model has left it without a clear route out of the current impasse.

All of this has made Switzerland an easy target. As frequent FT columnist Sam Lowe put it recently: “Switzerland […] didn’t really do anything wrong. [It now serves] as a cautionary tale to everyone else still negotiating with the US.”

Narrow room to manoeuvre

Where does this leave the country now?

Internal options are limited and politically sensitive. Switzerland could propose direct investment into US industrial regions in exchange for tariff relief. But there’s no mechanism for the government to commit private capital on behalf of companies.

Boosting purchases of US liquefied natural gas (LNG) has been suggested. But Switzerland lacks import infrastructure and consumes gas in negligible amounts. Any such deal would be largely symbolic.

Defence procurement offers a more plausible lever. The country is already buying F-35 fighter jets from the US. An expansion – or cancellation – of that order could feature in future negotiations. Terminating the more than $9 billion arrangement has already been proposed by frustrated Swiss politicians. Agricultural access is another option, but it would almost certainly trigger a referendum and strong opposition from farmers.

Then there’s gold. Switzerland processes about two-thirds of the refined supply of the precious metal. Some lawmakers have proposed using that status to introduce preferential tariffs based on environmental or sourcing standards – or even targeting foreign refiners operating in the country with new levies of its own. But the Swiss central bank warns that gold trade data, being largely financial in nature, distorts true trade balances. Any move here would be technically complex and politically fraught.

One more unorthodox idea: the FIFA route. Swiss People’s Party parliamentarian Roland Rino Büchel has proposed enlisting Gianni Infantino, the Swiss-born FIFA president and longtime Trump associate, as a diplomatic bridge. Infantino attended the US president’s inauguration and appeared with him at last month’s Club World Cup final. Some have even suggested moving FIFA’s Zurich headquarters to Miami as part of a soft-power offer.

Swiss companies such as Roche and Partners Group are also lobbying in Washington. Whether these private channels succeed where government talks have stalled remains to be seen.

What next?

The stand-off has prompted a broader – and unusually public – debate about the limits of Switzerland’s proud economic independence. Long celebrated for sitting outside the EU and maintaining sovereign control over regulation, agriculture, immigration and foreign policy, it now appears exposed in an age of aggressive bilateralism.

With no customs union, no US free trade agreement and limited bloc-level support, Switzerland has had to weather this tariff storm alone. Some officials and lobby groups are asking whether closer alignment with the EU might offer better protection in future.

In the end, the country faces a difficult choice: offer politically sensitive concessions, seek a symbolic compromise, absorb the tariffs and adapt – or possibly wait Trump out. But the deeper question may be this: has the country’s long-cherished independence – its regulatory sovereignty, neutrality, policy discipline – become a liability in today’s geopolitical economy?

Copyright The Financial Times Limited 2025