Switzerland seals deal slashing US tariffs

Switzerland’s agreement with the Trump administration to more than halve its tariff rate from 39% to 15%, will be a welcome relief to the export-oriented Alpine economy. In return Switzerland has agreed to invest USD 200 billion in the US.

The agreement, which follows a Swiss business delegation visit to the White House, improves the outlook for the Swiss economy. The deal brings Switzerland’s tariff rate into line with the neighbouring European Union. In the light of the agreement, we revise our GDP growth outlook from 0.9% to 1.2% in 2026. The driver behind our growth upgrade is that a 15% tariff applied to all Swiss exports to the US, excluding those currently exempt such as pharmaceuticals, would reduce the tariff hit to GDP from around 0.5% of GDP to 0.2% - or less.

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Tariffs on Swiss pharmaceuticals remain a wildcard in trade talks with the US, as the sector may still be subject to sectoral duties. In addition, a challenge to the constitutional basis of the US import tariffs levied through International Emergency Economic Powers Act (including tariffs on the Swiss economy) is currently before the US Supreme Court. A ruling against the application of tariffs by the Supreme Court is likely to have minimal impact on markets because there are alternative mechanisms for the US to impose duties. In any case, if the Trump administration replaced some of its existing tariff mechanisms, they would likely only be lowered to the same level of 15%.

Tariffs on Swiss pharmaceuticals remain a wildcard in trade talks

Since 7 August 2025, a 39% tariff has been applied to most Swiss goods exports to the US. That was the highest tariff applied to any developed economy, and affected nearly two-thirds of Switzerland’s goods exports to the US. The only exemptions were products already covered or potentially covered by sectoral tariffs, including pharmaceuticals, semiconductors, consumer electronics and some minerals.

We expect the Swiss National Bank (SNB) to maintain interest rates on hold at zero percent. The threshold for imposing negative interest rates is high unless growth or inflation were to weaken materially: on the contrary, the trade deal reinforces our positive outlook for the Swiss economy in 2026.

Our portfolios are well positioned to benefit

Our portfolios are well positioned to benefit from this announcement. We increased our exposure to Swiss stocks to overweight in September, as we anticipated upside potential in a market that is heavily weighted to healthcare and financial sectors, with attractive valuations and improving earnings. The Swiss franc is also rebounding and should gain modestly in an environment where we continue to expect a softer US dollar. We expect the Swiss sovereign bond yield curve to steepen, given an already low inflation forecast from the SNB, and positive news on tariffs supporting growth. Short-dated government bond yields should remain negative, depending on Swiss franc strength.