In a surprising move, US President Donald Trump’s announcement of a staggering 39% tariff on Swiss exports sent shockwaves through the Swiss Market Index (SMI), which tumbled 1.9% on Monday. This marked its lowest ebb since late April.
Luxury Brands in the Crosshairs
Luxury behemoths, including Richemont and Swatch, bore the brunt of this sudden tariff hike, opening the day with losses reaching up to 3%. The heightened pressure on these firms underscores the vulnerability of Switzerland’s high-end export sector to international trade policies.
A Glimmer of Resilience
Despite the downturn, pharmaceutical giants Roche and Novartis displayed resilience, as the newly imposed tariffs notably exempted drug exports. Their stability offers a silver lining amid the broader market turbulence.
Inflation and Interest Rates: The Silent Players
Amidst the trade drama, Switzerland’s economic indicators painted a muted picture. Annual inflation nudged up to 0.2% in July, slightly surpassing forecasts. This tepid inflationary trend augments speculation around the Swiss National Bank possibly steering interest rates into negative territory in the forthcoming months.
Manufacturing Under Strain
Adding to the economic unrest, the Swiss Purchasing Managers’ Index (PMI) dropped to 48.8 in July, indicating a noticeable contraction in manufacturing activity. The PMI decline hints at broader economic repercussions beyond the immediate tariff impact.
As noted by TradingView, this series of developments throws a spotlight on the sweeping repercussions of international policy shifts on domestic markets. Stakes remain high for Switzerland as the nation navigates these freshly turbulent waters.
