Swiss GDP Shrank for First Time Since 2023 Before US Tariff Deal
(Bloomberg) — Switzerland’s economy contracted in the third quarter for the first time in more than two years, highlighting the impact outsized US tariffs had before officials secured a trade deal last week.
Gross domestic product adjusted for large sport events shrank 0.5% from the previous three months, according to a first government estimate published on Monday. That compares with an increase of 0.1% in the April-June period and is much worse than the 0.1% drop predicted by economists in a Bloomberg survey.
“Driven by a sharp decline in value added in the chemical and pharmaceutical sector, industry as a whole recorded negative growth,” the State Secretariat for Economic Affairs said in a statement. “The services sector grew at a below-average rate.”
This was only the second quarter of contraction the country has reported since the Covid pandemic, still leaving it with a better track record than its European peers. But US tariffs of 39%, introduced in early August, took a toll on the export-focused economy. With an agreement cutting them to 15% announced on Friday, a snapback in growth is feasible.
The deal provides particular relief for Swiss manufacturers of watches, machines and precision instruments. Along with food and chemicals producers, they were hit hardest by the 39% levy, according to Switzerland’s central bank. Other key exports like medicines and gold were and remain exempt from tariffs under the different regimes the US applies.
Economists raised their outlooks for Switzerland after the deal. It roughly halves the expected hit to exports going to America, according to Bloomberg Economics. The breakthrough also gives the Swiss a competitive advantage over peers by taking the average tariff rate on all their sales to the US below that of the EU and the UK.
Zurich’s KOF research institute estimates that the lower levy will mean growth that’s between 0.3 and 0.5 percentage points higher per year than it would have been under the 39% surcharge. Expansion in 2026 — which the institute had previously put at 0.9% — will therefore now clearly exceed 1%, it said.
“However, it should not be forgotten that a 15% tariff on certain goods exported to the US also affects economic performance in Switzerland,” said KOF’s co-director Hans Gersbach. “The new tariff rate brings relief, but significant burdens and risks remain for the Swiss economy.”
Swiss Economy Minister Guy Parmelin defended the deal on Sunday, saying in a newspaper interview that “it’s been a long road, and the result is the best we could achieve.”
Aside from US tariffs still being significantly higher than before US President Donald Trump’s early April move to impose blanket tariffs across the world, exporters also face the burden of the strong franc, which climbed to a decade high against the euro in the wake of deal.
The currency’s strength could eventually see the Swiss National Bank introduce negative interest rates after already lowering its benchmark to zero. However, a separate Bloomberg survey released Monday showed that most economists still reckon rates will stay on hold through 2027.
The GDP report excludes data from large sport events because they can distort the overall picture of the country’s economy. Switzerland is the home to several global sports bodies, so when for instance the Olympic Games take place — earning revenue for the International Olympic Committee — that boosts the output statistic without benefiting economic activity.
A final growth reading along with further details on its drivers will be published Nov. 28.
–With assistance from Joel Rinneby, Kristian Siedenburg and Harumi Ichikura.
©2025 Bloomberg L.P.
