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 increase by 1.3% this yr, however famous that this stage of financial progress was “considerably below-average” for the nation. For subsequent yr, they’re now forecasting gross home product (GDP) progress will sluggish 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 stated in a information launch on Thursday.

Switzerland is an export-driven economic system, and the U.S. was the highest international 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 did not safe a take care of U.S. officers — one of many highest country-specific charges imposed by the Trump administration.

The nation’s largest exports embrace watches, prescribed drugs and valuable metals — however the nation can 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 services in America.

Swiss officers stated in Thursday’s replace that underneath present commerce situations, world demand for Swiss items and providers is predicted to rise “solely modestly” within the coming quarters.

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

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

“If Switzerland have been to achieve an settlement with the U.S. or if worldwide commerce coverage have been to ease, a extra favorable growth could be anticipated,” they stated. “General, nonetheless, draw back dangers at the moment dominate.”

Past Trump’s tariffs, demand for the Swiss franc can be including to Switzerland’s financial and diplomatic woes, with the forex – sometimes seen as a secure haven asset in occasions of broader volatility – gaining greater than 12% this yr 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 adverse rates of interest.

Officers stated 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 potential.

“A deterioration within the worldwide atmosphere can’t be dominated out,” they stated, 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 could be anticipated,” they stated.

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

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

De Montpellier lately revised her personal progress forecast for Switzerland for 2026 right down to 0.8% – nearly half the expansion charge she was forecasting at the start of this yr.

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

Melanie Debono, senior Europe economist at Pantheon Macroeconomics, stated on Thursday that the brand new forecasts from the Swiss authorities have 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 can in the end feed by way of to decrease rates of interest confronted by companies — means we count on the Swiss economic system to enter recession within the second half of this yr,” she instructed CNBC by way of electronic mail. “We predict Swiss GDP will fall by 0.2% quarter-to-quarter in each Q3 and This fall.”

Chatting with 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 stated. “Nonetheless, I consider it is going to be solved. Swiss politicians are actually understanding find out how to take care of businesspeople. The Trump administration, these are businesspeople, these aren’t traditional politicians … However I am assured that inside the subsequent couple of weeks there might be a a lot better answer than the 39%.”

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

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