Switzerland slashes GDP forecast as Trump’s tariffs weigh on economic system

Switzerland’s authorities on Thursday lower its 2026 financial forecast for the nation, citing the Trump administration’s punitive tariffs as a “heavy burden” on its industries.

Officers held their forecast for the Swiss economic system to develop by 1.3% this 12 months, however famous that this stage of financial progress was “considerably below-average” for the nation. For subsequent 12 months, they’re now forecasting gross home product (GDP) progress will gradual to 0.9% – down from a earlier 2026 forecast of 1.2% progress.

“Larger U.S. tariffs have additional clouded the outlook for the Swiss economic system,” officers mentioned in a information launch on Thursday.

Switzerland is an export-driven economic system, and the U.S. was the highest overseas vacation spot for its items in 2024. Again in August, Switzerland was hit with 39% tariffs on items despatched to the U.S. after a Swiss delegation didn’t safe a cope with U.S. officers — one of many highest country-specific charges imposed by the Trump administration.

The nation’s greatest exports embrace watches, prescribed drugs and treasured metals — however the nation can also be famend for its luxurious items, chocolate and skincare merchandise. Branded and patented pharma merchandise are newly topic to 100% tariffs upon entry to the U.S., until their producers have or are constructing manufacturing amenities in America.

Swiss officers mentioned in Thursday’s replace that below present commerce circumstances, world demand for Swiss items and providers is anticipated to rise “solely modestly” within the coming quarters.

“The present commerce coverage setting presents explicit challenges for Switzerland,” they mentioned. “The extra tariffs are putting a heavy burden on affected sectors and export-oriented firms, with vital ripple results anticipated throughout the broader economic system. Furthermore, persistent uncertainty can also be dampening financial exercise.”

The federal government additionally warned that almost all of America’s different buying and selling companions had been granted decrease tariff charges, putting Swiss exporters at a aggressive drawback within the U.S. market. White Home commerce coverage held vital affect over the longer term trajectory of Switzerland’s economic system, they mentioned.

“If Switzerland had been to achieve an settlement with the U.S. or if worldwide commerce coverage had been to ease, a extra favorable improvement can be anticipated,” they mentioned. “Total, nonetheless, draw back dangers at the moment dominate.”

Past Trump’s tariffs, demand for the Swiss franc can also be including to Switzerland’s financial and diplomatic woes, with the forex – usually seen as a protected haven asset in instances of broader volatility – gaining greater than 12% this 12 months amid lingering uncertainty. The rising franc has created headwinds for the nation’s central financial institution by placing downward strain on costs as policymakers battle to keep away from disinflation and unfavorable rates of interest.

Officers mentioned on Thursday that the Swiss franc was persevering with to play a task in Switzerland’s financial challenges – and cautioned {that a} additional strengthening of the franc was attainable.

“A deterioration within the worldwide setting can’t be dominated out,” they mentioned, noting that dangers associated to a market correction, world sovereign debt and the geopolitical panorama persevered.

“Ought to any of those dangers materialize, additional upward strain on the Swiss franc can be anticipated,” they mentioned.

Charlotte de Montpellier, senior economist, France and Switzerland at ING, informed CNBC on Thursday that “dangers for the Swiss economic system are mounting.”

“Its publicity to the US market is huge, amounting to 4% of GDP,” de Montpellier mentioned in an e-mail. “I estimate a cumulative direct influence of the present enhance of US tariffs to 39% on Swiss GDP of about 0.86% within the first two years.”

De Montpellier just lately revised her personal progress forecast for Switzerland for 2026 right down to 0.8% – virtually half the expansion charge she was forecasting initially of this 12 months.

“I imagine that the chance are tilted to the draw back and the probability of getting 1 / 4 of unfavorable progress has strongly elevated,” she mentioned. “The Swiss economic system, lengthy buoyed by pharmaceutical exports, now faces a interval of heightened uncertainty that can result in a pointy deceleration of exercise momentum.”

Melanie Debono, senior Europe economist at Pantheon Macroeconomics, mentioned on Thursday that the brand new forecasts from the Swiss authorities had been in keeping with her personal.

“A fall in items exports, as indicated by month-to-month nominal items commerce figures, coupled with falling funding — in mild of the surge in uncertainty and regardless of [Swiss National Bank] charge cuts, which is able to finally feed by means of to decrease rates of interest confronted by companies — means we anticipate the Swiss economic system to enter recession within the second half of this 12 months,” she informed CNBC through e-mail. “We expect Swiss GDP will fall by 0.2% quarter-to-quarter in each Q3 and This autumn.”

Talking to CNBC’s Carolin Roth on Wednesday, Georges Kern, CEO of Swiss luxurious watchmaker Breitling, labeled the U.S. tariffs “horrible information” for Switzerland.

“39% tariffs is horrible,” he mentioned. “Nonetheless, I imagine will probably be solved. Swiss politicians are actually understanding easy methods to cope with businesspeople. The Trump administration, these are businesspeople, these should not traditional politicians … However I am assured that inside the subsequent couple of weeks there might be a a lot better resolution than the 39%.”

Kern mentioned that because the tariffs got here into impact, Breitling had hiked costs globally to offset the influence, noting that luxurious manufacturers had extra flexibility on this regard.

“[In] the U.S. we elevated costs 4%, but additionally worldwide to stability the price of the tariffs since you can not simply enhance costs to the buyer by 39%,” he defined. “Thank god we’ve a sure pricing energy at our worth level, I do not suppose it’s going to influence us dramatically, really we’re rising.”