How tiny Switzerland became a global trading power 

Switzerland plays a major role in world trade for such a small country. But why is that, exactly? 

“Switzerland has no foreign policy – it has a foreign trade policy,” goes an old saying that held true until the First World War. Forging political alliances was considered a delicate matter, but doing business was not. In this respect, Switzerland has always been interested in free trade. And trade agreements are correspondingly important to the country. There is a broad political consensus that the authorities should proactively seek agreements that benefit Swiss industry. 

That is why few countries are as deeply integrated into the global economy as Switzerland. This is no coincidence, but rather a strategic orientation of a small, landlocked country with no natural resources, which industrialised early on and integrated itself into global value chains. It often managed to do so in the slipstream of neighbouring colonial powers. 

The most important partner at present is the European Union (EU): the relationship between Switzerland and the EU has been governed by bilateral agreements since the 1990s. Swiss politicians are currently grappling with the future of the bilateral approach between Bern and Brussels. It is the most important foreign policy issue for the coming years. 

 At times, 70% of Swiss exports went to the EU. By 2025, this figure stood at around 60%. The volume of trade with other partners has grown. The US, for example, is Switzerland’s second-most important export market, accounting for around 18%. However, US tariff policy since 2025 has led to deep uncertainty – not only in Switzerland, but globally. Consequently, Bern has recently been moving swiftly to conclude many trade agreements, including some that had been stalled for years. 

Switzerland was the first European country (alongside Iceland) to enter into a trade agreement with China. As Switzerland’s third-largest trading partner, China accounts for around 6% of Swiss exports.  This share is lower than the discussions surrounding the recently updated agreement might suggest. 

But the symbolic significance behind it has always been important: Switzerland is on an equal footing with global players. Critics, however, warn that Switzerland is thereby taking a political risk, as the EU and the US are pursuing a strategy of economic decoupling. In other words, they are doing exactly the opposite of Switzerland. 

Generally speaking, Switzerland tries as far as possible to abide by the existing rules – those laid down by the World Trade Organization (WTO). It is strongly committed to the WTO and takes the approach of defending its interests, where possible, within multilateral organisations. There, smaller states can form alliances to protect their interests. This is becoming increasingly necessary in the face of the major powers, some of which ignore these rules.

Indeed, the power struggle between the major powers in recent years has thrown the global economy into disarray. Free trade and multilateralism have fallen victim to geopolitical rivalries. While global structures remain intact, they have been significantly weakened. Switzerland is seeking to find its new role within this context. 

However, things do not always run smoothly. Switzerland’s system of direct democracy makes it possible to reject international treaties at the ballot box. New trade agreements are often challenged by referendums. 

The country’s economic structure, comprising large multinational corporations and a multitude of small and medium-sized enterprises, is regarded as a recipe for success: economically, Switzerland remains on a solid footing, largely thanks to the global interconnectedness of its industry. 

Yet for individual companies, the headwinds in global politics can turn into a full-blown storm. Navigating geo-economic tensions is becoming increasingly important for the economy.

This also applies to Switzerland’s most important export industry: the pharmaceutical sector. Its significance for prosperity and employment has grown in recent decades. However, the Swiss pharmaceutical sector is coming under pressure from competition in the US – and increasingly from that in China and India.

In the digital age, trade is becoming increasingly decoupled from physical goods. Switzerland is at the forefront thanks to an innovative IT sector that benefits greatly from the start-up culture centred around the federal technology institute ETH Zurich and the Swiss Federal Institute of Technology Lausanne (EPFL). And the Swiss authorities take this into account in their foreign trade policy: Switzerland is one of the countries that focused on digital trade agreements at an early stage. 

At present, the key issues in Swiss trade policy are how to deal with protectionist measures such as tariffs and fears of a global recession. Confidence in the country’s own capabilities and strategies, however, appears to be stable, as there are hardly any vocal political calls for a fundamental change of direction. 

Switzerland has fared well economically with its current course. And it will continue to do so – unless, for geopolitical reasons, it is forced to make a U-turn. 

Edited by Benjamin von Wyl 

Adapted from German by Patrick Julian Huwyler/ds