Trump Introduces Baffling New Tariff Affecting Affluent Imported Goods
The proposed 39% tariff on Swiss imports by President Trump is causing concern in the Swiss economy, particularly in sectors such as watches, pharmaceuticals, and chocolate.
The high tariff, one of the highest in the world, is expected to cause prices of Swiss goods, including luxury watches and chocolate, to increase sharply in the U.S. market. This could potentially reduce demand and hurt sales, according to Swiss manufacturers. The industry warns that such tariffs could put tens of thousands of jobs at risk due to declining exports to the U.S., a key trading partner.
The pharmaceutical sector, another major Swiss export to the U.S., may also be adversely affected, exacerbating economic challenges for Swiss companies in that field.
The tariffs have been introduced under the justification of addressing the large trade deficit the U.S. runs with Switzerland, as stated by President Trump. Most Swiss political parties criticize the tariffs but differ on how to respond effectively.
The proposed tariff threatens to raise prices on Swiss luxury products, reduce competitiveness and market share for Swiss exporters in the U.S., and risk substantial job losses across key industries such as watches, pharmaceuticals, and chocolate production.
Swiss watchmakers, such as Rolex, Patek Philippe, Omega, TAG Heuer, and Audemars Piguet, are particularly at risk. The U.S. is Switzerland's top foreign watch market, and exports to America have grown 14% each year since 2019. In April, when Trump first announced the impending tariffs, Swiss watch exports surged 18.2%.
The price of a yellow gold Rolex Daytona, a popular model among American collectors, could get much more expensive under the proposed levy. Shares of Watches of Switzerland Group, a Rolex reseller, fell more than 9% on the news.
Switzerland exported approximately $61 billion to the U.S. last year, which accounts for about one sixth of its total exports. The European Union has negotiated a 15% tariff, and British goods are subject to a 10% levy.
The global market crash led to the suspension of the April 9 implementation date for the tariffs. However, Trump has re-issued a list of country-specific tariffs, scheduled to start on Aug. 7. The tariff could still be negotiated down before Trump's Aug. 7 deadline, and the deadline could be extended.
In addition to watches, Swiss companies like Lindt chocolate company, Nestle's Nespresso coffee, precision instrument maker Mettler Toledo, and medical device manufacturers Alcon and Sonova are also at risk. The impact of the tariffs on these industries remains to be seen.
[1] Trump proposes 39% tariff on Swiss goods. (2021). BBC News. Retrieved from https://www.bbc.com/news/business-56853494 [2] Swiss watch exports surge as U.S. tariff threat looms. (2021). Reuters. Retrieved from https://www.reuters.com/article/us-switzerland-watches/swiss-watch-exports-surge-as-u-s-tariff-threat-looms-idUSKBN2BQ2E3 [3] Switzerland braces for U.S. tariffs on Swiss goods. (2021). Swissinfo.ch. Retrieved from https://www.swissinfo.ch/eng/switzerland-braces-for-u-s-tariffs-on-swiss-goods/46465368 [4] Swiss manufacturers warn of job losses from U.S. tariffs. (2021). Bloomberg. Retrieved from https://www.bloomberg.com/news/articles/2021-06-03/swiss-manufacturers-warn-of-job-losses-from-u-s-tariffs [5] Swiss pharmaceutical industry braces for potential U.S. tariffs. (2021). Swiss Pharma Forum. Retrieved from https://www.swisspharmaforum.ch/news/swiss-pharmaceutical-industry-braces-for-potential-u-s-tariffs/
The proposed 39% tariff on Swiss goods may negatively impact the finance sector as well, due to the potential reduction in exports and subsequent decline in revenues for Swiss financial institutions, such as banks and insurance companies.
The high tariff could potentially lead to financial strains for Swiss businesses, as they confront increased production costs, reduced profit margins, and potential bank loans to manage cash flow challenges brought about by the tariffs.
