Swiss Face 72-Hour Race to Lower Trump’s ‘Absurd’ 39% Tariff

(Bloomberg) — The Swiss government held crisis talks on Monday to come up with a proposal that might dissuade US President Donald Trump from imposing 39% tariffs on the country in less than three days.

With the rate — the highest among industrial nations — set to go into effect on Aug. 7, President and Finance Minister Karin Keller-Sutter convened an emergency meeting of the governing Federal Council on Monday to discuss how to proceed. While officials worked behind the scenes in the Federal Palace to find a solution, the matter dominated lunchtime conversation at Bern’s city parks.

Separately, negotiators with the Swiss State Secretariat for Economic Affairs have reached out to their US counterparts to try and find a way forward. The agency, which hammered out a far more favorable tentative deal with the US more than a month ago, also held a briefing with business leaders on Monday.

Keller-Sutter, who was criticized in the Swiss press over the weekend for allowing Trump to blindside her without a backup plan, said she would be willing to make a last-minute trip to Washington if she thought there was a chance a deal could be made.

“I don’t rule out such a visit, but first, the two sides should come closer together in their positions,” she told the newspaper Schweiz am Wochenende. It’s not clear what, if any, response there has been from the US government.

“It’s unfortunate that the Swiss took so much time” to react, says Thomas Borer, a former Swiss diplomat who now runs his own consulting firm, echoing the criticism made in the press.

Despite the backlash, the Swiss president doesn’t face any immediate danger of losing her job. The system is designed for continuity, and the presidency rotates on an annual basis, meaning her term running the country will come to a close at the end of the year.

The Trump administration justified Friday’s move by claiming that Switzerland had in essence stolen money from the US and should therefore be hit with a tariff rate commensurate with the trade deficit — a notion Keller-Sutter dismissed as “absurd.”

Switzerland ran a $38 billion bilateral trade surplus with the US last year, according to US Census data, which was the 13th biggest for the world’s largest economy. While Swiss exports to the US collapsed after the introduction of tariffs in April, they rebounded in June, suggesting that trade between the two countries remained robust.

What Bloomberg Economics Says…

“We estimate that this represents a tariff shock of around 23 percentage points for the Swiss economy, putting roughly 1% of its GDP at risk over the medium term.”

-Jean Dalbard, economist. For full React, click here

There are not many routes available to Switzerland, but one is to offer to buy liquefied natural gas from the US. While the landlocked country is focused on hydroelectric and nuclear power, it does use a small amount of gas, primarily in the winter to cushion swings in its energy supply. Should Switzerland choose to import more gas, it would have to travel through neighboring countries, which could potentially increase transit costs.

So far, the expectation appears to be that Keller-Sutter and the government will secure a better deal. The Swiss market benchmark SMI was down just 0.43% as of 11:37 a.m. on Monday.

“We expect negotiations to bring the 39% Swiss tariff rate closer to the 15% agreed with the EU,” Lombard Odier investment strategists said in a research note. “In the unlikely event that this trade dispute is not resolved,” they added, they will revise their forecast for gross domestic product.

Given the “volatility of decisions we’ve seen from the US,” there’s hope that a solution may be found, Franziska Ryser, a lawmaker of the Green party, told Bloomberg.

“On the other hand, we must draw political conclusions from the situation and acknowledge that — at least under the Trump administration — America is no longer a reliable partner,” she said. “This means that we should strengthen cooperation with the EU and coordinate more closely with our European partners.”

–With assistance from Dylan Griffiths and Anna Shiryaevskaya.

(Updates to add detail in the second paragraph about emergency meeting. An earlier version of this story corrected spelling of Keller-Sutter.)

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