President Trump’s tariffs reshaped worldwide supply chains, altered investment patterns, and strained traditional alliances, prompting Switzerland to reassess its global role.
Switzerland served as a neutral mediator and diplomatic force for many years. The conflict between France and the Roman Empire, known as the War of the Spanish Succession, concluded in 1714 with a treaty signed in Baden. In 1872, a tribunal in Geneva ruled that the UK must compensate the US for supplying warships to the Confederation during the Civil War.
Later on, the nation was involved in establishing navigation rights in the Black Sea and in resolving conflicts ranging from Indochina to Algeria.
Many people in the mountainous nation are unsure if their long-standing model of neutrality and exceptionalism is still relevant in today’s transactional and power-focused world, especially after the US imposed high tariffs on them recently.
Switzerland, home to Davos and international organizations like the World Trade Organization and the International Committee of the Red Cross, represents a globalism that is currently unfashionable in the modern world.
Authorities warn that the independent model could pose a challenge for a country with a population of just 9 million.
Switzerland, known for its democracy and peaceful history, may have limited influence in trade wars compared to developing countries like Laos, Myanmar, and Syria.
Switzerland is the subject.
There is a growing desire to enhance ties with the European Union due to the more advantageous tax deal negotiated with the Trump administration. Swiss firms are also considering moving their production facilities to neighboring countries.
Switzerland can no longer remain neutral as it did in the past, according to Jon Pult, a legislator and vice president of the Swiss Social Democratic Party. He stated that the era where Switzerland could navigate between opposing sides has come to an end.
Adrian Steiner, CEO of Thermoplan, a coffee machine manufacturer supplying Starbucks and McDonald’s, attributed Switzerland’s success to the effectiveness of their system under traditional rules.
“We have implemented a new policy where we are no longer involved in such matters. Our size prevents us from competing on a larger scale, where being neutral is not a significant factor.”
Switzerland was taken aback by the sudden implementation of a 39% rate last week, despite lengthy discussions. The country views the USA as its biggest market for exports such as watches, chocolate, pharmaceuticals, and machinery. The front page of the newspaper Blick reflected the nation’s shock with a black page bearing the stark message “A dark day for our country.”
Survey of Switzerland with the United States
Switzerland’s high tariff rate is primarily due to its significant trading surplus with the US, which reached US$48 billion by June this year. The surplus has recently grown as a result of increased imports of pharmaceutical and gold products aiming to enter the US before the expected tariffs.
Politicians and experts have proposed different suggestions to satisfy Trump, such as increasing purchases of beef, liquefied natural gas, and U.S. F-35 fighters, or relocating FIFA headquarters from Zurich to Miami. However, Swiss President Karin Keller-Sutter stated that quick fixes would not be feasible after a recent unsuccessful attempt to halt tariffs in Washington.
Keller-Sutter mentioned that they are uncertain about the duration of the situation and will keep engaging in discussions with the US. Ultimately, the decision lies with the American president.
Swiss companies are facing difficulties competing with Germany and France due to higher tax rates, which could lead to significant job losses in Switzerland, according to the Swissmem industrial association.
The trade association Interprofession du Gruyère, which represents 1,600 dairy farms producing the cheese, reported that the industry in the US, a major consumer of Gruyère exports, is experiencing a significant decline.
Ypsomed, a medical device manufacturer, revealed its intention to shift some of its production to the US from Germany and expedite the setup of a production facility in the US.
Steiner mentioned that Thermoplan was considering relocating production to avoid losing or transferring business.
The tariff crisis is not the initial challenge to Swiss identity.
After 2008, the United States passed legislation that compelled Swiss banks to share details about American clients with the U.S. Federal Revenue. This move dealt a significant blow to the long-standing banking confidentiality practices dating back to the 18th century. Recent years have seen Switzerland facing various banking scandals, including the 2023 collapse of Credit Suisse.
Switzerland faced challenges in justifying its longstanding neutrality during the conflict in Ukraine, leading it to align with the EU sanctions against Russia under pressure from neighboring countries and the Biden administration.
Neutrality does not guarantee protection from all security threats, as it only holds value when recognized by others, according to Stefanie Walter, a professor at the University of Zurich.
European Union
Swiss are currently discussing whether to sever connections with the EU as Trump’s tax situation unfolds.
Switzerland, not a part of the EU and unlikely to join in the future, is closely linked to the EU through various bilateral agreements. A set of agreements aimed at enhancing Switzerland’s entry to the EU’s single market will go to a public vote, possibly in the coming year.
The campaign is already fully booked.
Marcel Dettling, President of the Swiss People’s Party, has recently released a video emphasizing the decision between “freedom and servitude,” where he burns the pages of the EU agreement and cooks a sausage on fire using a medieval wing.
Analysts believe that the tariff situation could boost the pro-EU campaign, with Walter noting that the agreement now appears much more favorable than it did recently.
Swiss Free Democratic Party lawmaker Hans-Peter Portmann stated that while Switzerland cannot join the EU and compromise its direct democracy model, it must reconsider its geopolitical focus.
“A small country such as Switzerland faces the danger of being overshadowed,” he commented. “The trade disagreement with the US has made many in Switzerland more aware.”
Translated by InvestNews
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