Switzerland slashes GDP forecast as Trump’s tariffs weigh on economy
Untere Schleuse wooden bridge in Thun, Switzerland.
Education Images | Universal Images Group | Getty Images
The Swiss government on Thursday lowered its 2026 economic forecast for the country, citing the Trump administration’s punitive tariffs as a “heavy burden” on industries.
Officials maintained their forecast that the Swiss economy would grow by 1.3% this year, but noted that this level of economic growth was “significantly below average” for the country. They forecast gross domestic product (GDP) growth for next year will slow to 0.9%, down from the previous 2026 growth forecast of 1.2%.
“Higher US tariffs have further clouded the outlook for the Swiss economy,” officials said on Thursday.
Switzerland is an export-oriented economy, and the foreign country where its goods were sold the most in 2024 was the United States. In August, Switzerland was hit with 39% tariffs on goods sent to the US after a Swiss delegation failed to reach an agreement with US officials; This is one of the highest rates imposed on a country-specific basis by the Trump administration.
The country’s biggest exports include watches, pharmaceuticals and precious metals, but the country is also famous for luxury goods, chocolate and skin care products. Branded and patented drug products will be subject to a new 100% tariff upon entry into the United States unless their manufacturers own or build manufacturing facilities in the United States.
Under current trading conditions, global demand for Swiss goods and services is expected to increase “only modestly” in the coming quarters, Swiss officials said in an update on Thursday.
“The current trade policy environment presents particular challenges for Switzerland,” they said. “Additional tariffs place a heavy burden on affected sectors and export-oriented companies, and significant ripple effects are expected across the economy. Moreover, persistent uncertainty also weakens economic activity.”
The government also warned that many of America’s other trading partners were given lower tariff rates, putting Swiss exporters at a competitive disadvantage in the U.S. market. They said White House trade policy has a significant impact on the future path of the Swiss economy.
“A more positive development can be expected if Switzerland reaches an agreement with the United States or if international trade policy is relaxed,” they said. “But overall downside risks prevail at the moment.”
Beyond Trump’s tariffs, demand for the Swiss franc is also compounding Switzerland’s economic and diplomatic woes; The currency, often seen as a safe-haven asset in times of broader volatility, has gained more than 12% this year amid continued uncertainty. The rising franc has created headwinds for the country’s central bank, putting downward pressure on prices, as policymakers struggle to avoid falling inflation and negative interest rates.
US dollar/Swiss franc
Officials said on Thursday: Swiss franc He continued to play a role in Switzerland’s economic difficulties and warned that further strengthening of the franc was possible.
“A deterioration in the international environment cannot be ruled out,” they said, noting that risks related to a market correction, global sovereign debt and the geopolitical landscape remain.
“If any of these risks materialize, further upward pressure on the Swiss franc can be expected,” they said.
The risks are increasing
Charlotte de Montpellier, ING’s senior economist for France and Switzerland, told CNBC on Thursday that “risks to the Swiss economy are increasing.”
“The impact on the US market is huge, accounting for 4% of GDP,” de Montpellier said in an email. “I estimate that an increase in US tariffs to the current 39% would have a cumulative direct impact on Swiss GDP of approximately 0.86% in the first two years.”
De Montpellier recently revised its 2026 growth forecast for Switzerland to 0.8%, almost half the growth rate it predicted at the beginning of this year.
“I believe the risk is to the downside and there is a strong likelihood of negative growth in the quarter,” he said. “The Swiss economy, long supported by pharmaceutical exports, now faces a period of increasing uncertainty that will lead to a sharp slowdown in activity momentum.”
The Swiss government’s new forecasts are in line with its own forecasts, Melanie Debono, senior European economist at Pantheon Macroeconomics, said on Thursday.
“As the monthly nominal goods trade figures show, the decline in goods exports and the decline in investment – in light of and despite the increase in uncertainty [Swiss National Bank] “Interest rate cuts, which will ultimately lead to lower interest rates faced by firms, mean that we expect the Swiss economy to enter a recession in the second half of this year,” he told CNBC via email. “We think Swiss GDP will fall by 0.2% quarter-on-quarter in both the third and fourth quarters.”
‘Terrible news’ for companies
Speaking to CNBC’s Carolin Roth on Wednesday, Georges Kern, CEO of Swiss luxury watchmaker Breitling, called the US tariffs “terrible news” for Switzerland.
“39% tariffs are terrible,” he said. “Still, I believe the problem will be solved. Swiss politicians really understand how to deal with businessmen. The Trump administration, these are businessmen, these are not classic politicians… But I am sure that a much better solution than 39% will be found in the next few weeks.”
Kern stated that once the tariffs came into effect, Breitling increased prices worldwide to offset the impact, noting that luxury brands have more flexibility in this regard.
“[In] “We’ve increased prices by 4% in the US, but at the same time globally to offset the cost of tariffs, you can’t increase prices to the consumer by 39%,” he explained. “Thank God, we have some pricing power at our price point, I don’t think it’s going to impact us dramatically, we’re actually growing.”
