Pharma tariffs could trigger Swiss recession, warns economist

US President Trump announced tariffs of 100% on branded patented medicine. Keystone / Christian Beutler

US tariffs on pharmaceutical products could lead to a recession in Switzerland, but their impact remains difficult to calculate until more is known about Donald Trump’s intentions, according to a Zurich economics professor.

+Get the most important news from Switzerland in your inbox

On Friday, the US president said he wanted to apply “100%” tariffs on “branded or patented” pharmaceutical products from October 1, “unless a company BUILDS its pharmaceutical factory in America,” he wrote in a message posted on his Truth Social platform.

“Many details are unclear,” said Hans Gersbach, professor of economics and co-director of the Center for Economic Research at the Swiss Federal Institute of Technology ETH Zurich, in an interview with AFP.

“If a large proportion of exports to the United States in the pharmaceutical sector were to be subject to tariffs, and remain in place for a long period of time, there would be a clear risk of recession in Switzerland,” he said.

However, he insists that the scope of these tariffs remains “particularly vague” for the time being, and that it will therefore be necessary to wait and see exactly which companies and pharmaceutical products will be affected in order to fully assess the repercussions for the Swiss economy.

This research centre affiliated with the University of Zurich has developed a model that can quickly calculate the impact of a shock on trade, such as customs duties.

On August 1, when Washington imposed 39% tariffs on Switzerland, the research centre was able to produce an initial assessment within a few hours, estimating the impact on Switzerland’s gross domestic product (GDP) at between 0.3% and 0.6%.

This was “a major shock” for the Swiss economy, but according to this model, a recession seemed “avoidable,” explains Gersbach.

This is because the 39% mainly affects watchmaking, machine tools and precision instruments (such as measuring instruments) and food products.

However, customs duties on medicines, which were previously exempt, would change the situation given the importance of the pharmaceutical industry in the Swiss economy.

The chemical and pharmaceutical sector contributes “around 7-8% of GDP” in Switzerland, according to Gersbach, and is the sector that has contributed most to export growth in recent decades, he points out.

In April, Roche and Novartis nevertheless announced huge investments in new plants in the US, where both groups already have major production centres. On Friday, the share prices of these two heavyweights in the Swiss sector showed little reaction on the stock market.

“Large companies such as Roche and Novartis could be exempt, but many smaller companies will be affected,” warns Gersbach.

Faced with pressure to lower drug prices in the US, Novartis announced on Monday the launch of a new platform where its treatment called Cosentyx (used to treat several inflammatory diseases) will be sold directly to patients in the US at a significant discount.

Adapted from French by DeepL/jdp

How we work

We select the most relevant news for an international audience and use automatic translation tools to translate them into English. A journalist then reviews the translation for clarity and accuracy before publication.  

Providing you with automatically translated news gives us the time to write more in-depth articles. The news stories we select have been written and carefully fact-checked by an external editorial team from news agencies such as Bloomberg or Keystone.

If you have any questions about how we work, write to us at [e-mail].

News