Customs storm
“If these high customs duties are maintained, the future is dark for Switzerland”
Zurich economist Hans Gersbach has calculated how much the country’s economic performance could decrease.
Hans Gersbach, professor of economics and co -director of the EPFZ cyclical research center.
(KEYSTONE/Michael Buholzer)
Trump imposes 39% customs duties from August 7 on goods from Switzerland. What do you think?
It is clearly an escalation of the commercial conflict with Switzerland and a brutal attempt to massively increase the price of access to the American market for Swiss companies.
On April 2, the threat was 31%. The EU and Japan negotiated 15%. Does the worst case possible for the Swiss economy occur?
It is certainly the worst case. But the question of how the pharmaceutical branch will be treated remains open. Separate surveys are still in progress.
Few countries now have higher customs duties than us. Did you expect such a situation?
We have studied all possible scenarios because with Trump, there are always surprises. But our main scenarios were customs duties of 10 or 15%.
What does this mean for the Swiss economy?
You must first continue to try to find an agreement with Trump to bring customs duties to 15% or less. If the high customs duties are maintained, the situation is dark. It will then depend on the treatment reserved for the pharmaceutical sector, because more than half of the exports of goods to the United States come from this sector. If it is also taxed at 39%, Switzerland’s economic performance would be considerably impacted.
How much?
According to our calculations, we would have a strong decline in the gross domestic product (GDP) at least 0.7%.
What does that mean?
This would represent a loss of average income per person of around 700 francs per year as long as these customs duties are in force. But if the Pharma was only struck by 10% customs duties, the losses would be significantly less, of the order of 0.3% of GDP. For sectors such as watchmaking, precision instruments and machines, it would still be a very hard blow. If the 39% also applied to the pharmaceutical industry, the drop in economic performance could be even greater, up to more than 1% of GDP, depending on the distortions of the supply chains that could arise.
Could this trigger a recession?
According to our cyclical spring forecasts, we have toured on growth of 1.4% for 2025. With customs duties in all sectors, we would therefore go to zero growth. The risk of recession exists if the pharmaceutical industry is also affected up to 39%, if the side effects are massive and if the embezzlement via other countries where customs duties are lower are not possible.
When companies try for example to recondition products in EU subsidiaries to deliver them to the United States?
The United States will look at it very closely. The reconditioning will not be enough, it will be necessary to produce at least a part in an EU country. But this is complicated and expensive and would weaken the Swiss economy even more.
Switzerland is now much less well lotie than its main competitors, the EU and Japan.
Exactly, it is much harder than the EU and will be disadvantaged in terms of competitiveness. This is why there is a risk of recession.
Is it comparable to the pandemic of five years ago?
Maybe not quite to the same extent. But if the pharmaceutical sector is also affected, it is a massive drop.
How can companies react now?
Some have a certain advantage with their specific products and can therefore impose higher prices in the United States. But many will suffer so much from competition that they will no longer be able to export to the United States. They will try to export more to other countries, to set up new supply chains or to relocate production sites. It takes a long time, it’s very expensive and it will not be profitable for everyone. There are some who will abandon if customs duties cannot yet be reduced by negotiations.
Are you expecting job cuts now?
We have to expect it. In the key industries, that is to say watchmaking, precision instruments, mechanical construction, the pharmaceutical industry, there will certainly be effects on employment, because if this customs threat is implemented, it will greatly deteriorate the competitive position of Swiss producers. If this leads to a relocation of production, this will have an additional impact on employment.
Can you estimate them?
No, it is too early for that. The question is always to know to what extent job losses can be offset by other sectors.
How fast will we feel it?
If the 39% is maintained, we will quickly witness a massive increase in partial unemployment, then to workforce discounts.
What does “quickly” mean?
Already in the coming months.
Have we already known this kind of situation, are there any historical examples?
There have always been customs shocks and commercial conflicts. But that only Switzerland is touched so violently and that all the countries around us are not, it is unusual, except of course in times of crisis or war. This is why uncertainty about the consequences is great.
Do customs duties also have repercussions on consumers?
Indirectly, through loss of income and the volume of wages, which decrease due to job cuts. In the end, this will also affect consumption.
Switzerland is suddenly more interesting for investments.
Yes, investments will certainly suffer.
Has Switzerland has badly negotiated?
I think the Trump administration has highlighted its maximum economic and technological power, Switzerland does not have much to oppose it. What is perhaps a little surprising is that we have noticed that towards the end that things did not go well, that we do not agree. But I wouldn’t say that we have generally negotiated.
Can Switzerland be taking countermeasures?
From my point of view, it is not judicious to take countermeasures of any kind whatsoever, because we could only lose, given the balance of power. The absolute priority is now to seek an agreement, however, to avoid these extreme customs duties.
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