U.S. Tariffs Threaten to Push Switzerland Into Recession

Until recently, Switzerland seemed like one of the few European economies on steady ground.

But a new move from the United States may change that. The U.S. has just imposed 39% import tariffs on some Swiss goods, and it’s sending shockwaves through the small Alpine nation, reports Ziare.

A Recession Coming?

Many experts now believe Switzerland could face a recession. Industry groups say tens of thousands of jobs are at risk. The government is trying to respond quickly.

Economy Minister Guy Parmelin said the federal cabinet will hold an emergency meeting on Monday to discuss the situation.

In an interview with Swiss broadcaster RTS, Parmelin said they still don’t fully understand why the U.S. decided to act.

He explained that President Trump might be reacting to the U.S. trade deficit with Switzerland, which reached nearly $48 billion last year.

Parmelin admitted the deadline to respond is tight. Switzerland has until August 7 to come up with a solution. He said they would do everything possible to show goodwill and make a revised offer.

A Tense Phone Call with Trump to Blame?

One idea is to increase Swiss purchases of U.S. liquefied natural gas (LNG). Another option could be to encourage more Swiss companies to invest in the U.S. economy.

Switzerland exports a lot to the U.S., especially in pharmaceuticals, watches, and machinery.

Some Swiss officials believe the tariffs may have been influenced by a tense phone call between Trump and Swiss President Karin Keller-Sutter.

A government source said the call “was not a success” and that Trump wanted more than just a 10% adjustment. Still, the Swiss hope to reach a deal soon.

Economist Hans Gersbach from ETH Zurich warned the tariffs could shrink Switzerland’s GDP by 0.3% to 0.6%.

If drug exports get hit too, the drop could be even worse. A longer crisis could push that number above 1%.

Swiss stocks are expected to fall when markets reopen on Monday. Nomura Bank predicts that the Swiss National Bank might cut interest rates next month to -0.25% to soften the blow.

There’s growing concern that Switzerland could be pulled into a recession if the dispute continues.