Trump’s tariffs raise risk of negative interest rates in Switzerland

"With Trump's tariffs, chances of negative SNB rates increase" Keystone-SDA

In the wake of US President Donald Trump’s 39% tariffs imposed on Switzerland, the likelihood of the Swiss National Bank (SNB) going back to introducing negative interest rates is increasing, according to an analysis published today by Raiffeisen.

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The shock caused by the announcement of US tariffs on Swiss products is profound and it seems almost impossible to reach a “reasonably acceptable negotiating result” on a lower customs rate, the institute’s experts write. Moreover, Switzerland risks finding itself in even rougher waters with possible sectoral duties on pharmaceuticals.

The situation will have repercussions for Swiss economic growth, not least because the country faces a “painful competitive disadvantage” compared to European Union members and the UK. However, the bank maintains its forecast – reduced in April following Trump’s first announcement of tariffs – of gross domestic product (GDP) growth of 1.3% in 2025 and 0.9% in 2026.

No further downward adjustments are necessary for the time being, says chief economist Fredy Hasenmaile, quoted in the paper. “However, this could happen if another piece of bad news were to follow, in the form of imposing sectoral tariffs on the pharmaceutical industry, which would further hit Switzerland.”

The stars and stripes customs hammer also has consequences for monetary policy in Switzerland: according to Raiffeisen, there is an increased risk that the SNB will drive the key rate (currently at 0.0%) below zero. In its last assessment in June, the central bank had made it clear that the hurdles to get this far are higher than those overcome in previous cuts: but should the economic outlook worsen, the risk of deflation increase or the franc appreciate significantly, negative interest rates would again be possible.

According to Raiffeisen, a cut in interest rates has become more likely also because the SNB’s room for manoeuvre in intervening in the foreign exchange market has shrunk as a result of the trade dispute with the US: such operations would in fact risk ending up even more in Washington’s sights.

Translated from Italian by DeepL/jdp

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