Switzerland Today
Dear Swiss Abroad,
As my colleague predicted yesterday, disagreements are indeed emerging across the political spectrum over the defence minister’s proposed VAT increase. Defence needs strengthening, but who should foot the bill? An eternal question on Switzerland’s political battlefield.
Also in money news, taking the pulse of the economy: The Swiss watch industry continues to struggle, while Swiss exports hit record highs in 2025 – and rents keep climbing.
Sunny regards from Bern
Switzerland’s political parties are divided over the proposed 0.8 percentage point increase in value added tax (VAT), though their objections (and alternatives) differ widely.
Yesterday’s briefing covered the federal government’s decision to commission a draft proposal for consultation by the end of March, calling for a temporary ten-year VAT increase from 2028. Now the parties have also made their positions known.
The defence minister appears to have the backing of his Centre Party. Party president Philipp Matthias Bregy told the Tages Anzeiger that a VAT increase would be preferable to higher national debt. The party’s vice-president, Yvonne Bürgin, however, stressed that essentials such as food and medicine should not be affected.
The Swiss People’s Party, Social Democrats and Radical-Liberal Party all oppose a higher VAT, but for very different reasons. The Swiss People’s Party doubts the increase would remain “temporary”, pointing to the federal tax introduced in 1940. Instead, it calls for cuts to asylum spending, development aid and federal personnel.
The Social Democrats focus their criticism on Switzerland’s long-term dependency on the US defence sector. The Radical-Liberal Party, meanwhile, wants broader action beyond defence financing alone. “Switzerland must finally react. Railway lines are being sabotaged in Poland, drones are circling over Munich and Putin is becoming increasingly aggressive,” said Radical-Liberal parliamentarian Heinz Theiler at yesterday’s press conference.
One point of consensus remains: Switzerland needs to better protect itself against future security threats. How to finance that protection is far from settled.
From punitive Liberation Day tariffs, to a trade surplus in Washington’s favour, and now record Swiss exports in 2025: An economic saga.
During a bilateral meeting with the US delegation at the WEF last week, Economics Minister Guy Parmelin, who also holds Switzerland’s rotating presidency this year, announced a trade surplus of $8.8 billion (CHF6.96 billion) in favour of the United States.
Despite the American tariffs, Swiss exports showed no sign of slowing. The Federal Office for Customs reported yesterday that total exports rose by 1.4% in 2025, reaching a record CHF287 billion. Exports to the US also grew, up 3.9% compared with 2024.
What is likely to displease US president Trump, however, is the decline in Swiss imports from the US, which fell by 5.7%.
Export growth was driven mainly by pharmaceuticals and chemical products, which accounted for 53% of all Swiss exports in 2025.
There is, however, disappointment for Swiss watch enthusiasts (our team lead Sam Jaberg among them) – Swiss watch exports fell by 1.7%. “US trade policy weighed heavily on the sector’s exports to its largest market, marking an end to the steady growth seen over recent years,” the Swiss watch industry association said in a press release. China remains the biggest concern, with exports down by more than a third over the past two years and no recovery expected in 2026.
Road and rail: An unlikely union. For the first time, the Swiss government plans to bundle rail, road and urban transport into a single proposal. A VAT surcharge here is also being floated to help fund the package.
Transport Minister Albert Rösti presented plans at a press conference yesterday, including improved rail links within the French-speaking region, 15-minute interval connections between Bern and Zurich, and more reliable regional services.
On the roads, the government wants to prioritise projects that can be implemented quickly. More than 30 motorway projects are set to be dropped. To ease congestion, authorities plan to rely instead on operational measures, such as temporarily opening emergency lanes to regular traffic.
The reactions from across the country are mostly positive with the eastern and central regions pleased with the projects set to be implemented. Fabian Peter, director of Public Works for canton Lucerne, said it was “a good day for central Switzerland”. However, Bern cantonal authorities regret the lack of commitment to build the Bern-East bypass in the coming decades.
To finance rail upgrades, the government proposes extending the VAT surcharge that supports the Rail Infrastructure Fund (BIF) beyond 2030. This could generate an additional CHF8 billion ($10 billion) by 2045, bringing the total rail expansion budget to CHF24 billion.
A public consultation is due to begin in June.
Location, location, location – the three golden rules of real estate. But rising costs in Switzerland are forcing renters to look elsewhere.
Would you prefer life in the mountains, by a lake, in a city centre, or, like more than 800,000 Swiss citizens, perhaps abroad? For many, the dream postcode simply doesn’t match the available bank balance.
What is the average rental cost of Zurich’s ‘gold coast’? Watson has compiled data showing the most and least expensive rental locations in Switzerland.
According to the figures, the average rent for a three-room (two bedrooms and a living room) apartment ranges from CHF890 ($1,159) in Bonfol (canton Jura) to more than CHF4,750 ($6,187) in Agra (canton Ticino).
There are also significant differences between major urban centres: A four-room apartment costs just under CHF2,100 in the centres of Aarau and Thun, but almost CHF5,000 in Zurich’s city centre.
As Watson notes, “the rise in housing costs in Switzerland seems unstoppable”. Rents rose across the country by 2.3% in 2025, after already experiencing increases in 2024 and 2023 by 3.2% and 4.7% respectively. In some cantons, rents jumped by as much as 10%.
One interesting development noted by Watson is that in many Swiss towns and villages, not a single rental advertisement appeared in 2025 – another symptom of the housing shortage that Switzerland has been suffering from for several years.
Personally, I will occasionally play the lottery in the hopes of one day securing my lakeside villa.
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