Swiss stock investors are bracing for today’s market reopening after US President Donald Trump slapped a punitive 39 percent export tariff on the country, among the highest in the world.
Trump’s tariff rollout landed on a holiday, Swiss National Day, which means any market fallout would only be felt once trading resumes today.
While Trump’s fresh tariff salvo left baseline rates unchanged for many of the US’ trading partners, some, such as Canada and Switzerland, got hit with significantly higher duties.
Photo: Bloomberg
Switzerland, known for its luxury watches, rich chocolates and banking giants, is one of the US’ biggest trade partners. Last year, it exported more than US$60 billion of goods to the US, ranging from pharmaceuticals and medical devices to Nespresso coffee. So the 39 percent tariff rate is likely to roil the market today, even if some investors cling to the hope that it is just another one of Trump’s negotiating ploys.
“Clearly, the Swiss market’s first reaction will be negative, but then attention turns to negotiations,” said Andreas Wosol, head of Amundi SA’s European equity value strategies. “This is an announcement where Trump wants a reaction rather than to impose this level of tariff.”
What stings more is that Switzerland’s EU counterparts were able to secure a 15 percent tariff rate. That creates a “competitive disadvantage” for the Swiss, UBS Global Wealth Management’s chief investment office said in a note on Friday.
For Holger Schmieding, chief economist at Germany’s Berenberg Bank, it is all a prelude to negotiations.
“It will be a big shock to the Swiss market initially, but this rate is so high it’s more of a strategy to start serious negotiations rather than a final rate, which is likely to be much closer to the EU,” he said.
Meanwhile, pharmaceutical heavyweights such as Novartis AG and Roche Holding AG are facing additional pressure after Trump sent letters to 17 drugmakers last week, demanding lower prices.
“On top of the tariff strategy now comes a full-scale assault on the pricing of branded drugs sold in the US,” Oddo BHF investment head Arthur Jurus said. “Trump is applying unprecedented pressure on drug prices, directly targeting Swiss pharmaceutical giants.”
The Swiss Market Index has trailed the STOXX 600 this year, partly because of its heavy exposure to defensive versus cyclical stocks.
The Swiss index could see a delayed reaction to its European peers, after the STOXX 600 slumped 1.9 percent on Friday for its worst day since April, while France’s CAC 40, Germany’s DAX and Italy’s FTSE MIB fell more than 2.5 percent.
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