Trump's 39% tariff takes effect in the first month, Swiss exports to the US plummet 22%

Facing the highest level of US tariffs in developed countries, it is undeniable that it has dealt a severe blow to exports of the core economy of Europe - Switzerland. This is also the first trade figure since Trump imposed a 39% tariff on Switzerland that has been in effect. Data released by the Swiss customs on Thursday showed that adjusted for seasonal fluctuations, foreign sales to the US market in August fell sharply by 22% compared to July, a rare drop for Swiss exports. Imports from the world's largest economy, the US, remained stable. The latest trade data shows that under the pressure of the 39% tariff imposed by the Trump administration on Switzerland, Switzerland's trade deficit with the US has significantly narrowed from CHF 2.93 billion last month to CHF 2.06 billion (USD 2.6 billion), marking the second lowest figure since the peak of the COVID-19 pandemic in 2020. Swiss exports to the US saw a significant decline in August. This trade deficit and the significant narrowing of the trade deficit are the core reasons why US President Donald Trump announced on August 1st the imposition of reciprocal tariffs, which went into effect globally on August 8th. Compared to the average 25%-30% aggressive reciprocal tariffs that caused severe turmoil in global financial markets in early April, the latest tariffs can be considered much milder. This is why Trump's tariff policy, after causing market downturns, has led to concessions and global stock markets repeatedly hitting new highs. However, for Switzerland, this is completely exceptional as the 39% tariff imposed by the Trump administration on Switzerland is much higher than the average 15% tariff rate in developed countries. In comparison, according to the US-EU joint declaration framework, the US imposes a not lower than 15% tariff cap on the vast majority of EU goods; in the latest US-Japan trade agreement, the Trump administration has cut tariffs on almost all Japanese goods (including cars) from the previous high of 27.5% to around 15%. The Swiss government's last-minute attempts to persuade Trump were unsuccessful, and although the two sides continued to dialogue, the Swiss authorities in Bern are still striving for lower tax rates. US Commerce Secretary Howard Ratnak last week said Washington is likely to reach an agreement with Switzerland, but he did not provide details. Negotiations with Washington are a balancing act for Swiss negotiators, especially on agricultural issues. Due to a belief in self-sufficiency, agricultural issues are sensitive in Switzerland. The head of a Swiss farmers' lobby group rejected the idea of allowing increased imports of beef or poultry from the US in an interview on Wednesday. Switzerland has long emphasized food security and to a certain extent self-sufficiency, implementing high tariffs and quota protections on Shenzhen Agricultural Power Group. Any move to open up imports of US beef and poultry would immediately touch a domestic "red line." Therefore, market access for Shenzhen Agricultural Power Group often faces strong opposition, consistent with Switzerland's high level of agricultural border protection (average agricultural tariffs of around 24.8%, high globally). In such a political and economic structure, it is difficult to get domestic approval for "opening up Shenzhen Agricultural Power Group in exchange for US tax cuts." Overall, Switzerland's overall exports have been minimally affected in the face of setbacks in trade with the US. Higher shipments to European countries (including neighboring landlocked countries France, Austria, and Poland), Canada, and Mexico helped offset the impact, resulting in an overall export volume drop of only 1%. Exports of goods subject to US tariffs have seen a significant decline. Swiss luxury watch exports decreased by 8.6% compared to July. Core drug exports, which are still exempt from the tariff, unexpectedly declined by 1.3%. Although the Swiss economy has shown resilience so far, the Swiss government has stated that due to the overly aggressive US taxation, economic growth is expected to significantly slow down this year. Switzerland is working to diversify its export dependency paths, including signing a new free trade agreement with the Southern Common Market (Mercosur) group this week.