A single phone call between U.S. President Donald Trump and Swiss President Karin Keller-Zutter has plunged Swiss-U.S. relations into turmoil, with the White House threatening to impose staggering tariffs of nearly 40% on Swiss goods. The punitive measure, set to take effect on August 7th, would be the highest tariff rate levied by the U.S. on any European nation. The abrupt decision, which Swiss officials hope to avert, is being attributed less to economic logic and more to the personal disposition of the U.S. president, turning months of careful negotiations on their head.
The proposed 39% tariff represents a dramatic escalation from a previously discussed 31% and the 10% rate that has been in place for months. If enacted, Switzerland would rank fifth globally for high U.S. tariffs, behind only Brazil, Syria, Laos, and Myanmar. The economic fallout could be severe. Swiss industries are bracing for impact, with the technology and machinery sectors warning the U.S. market would become “dead for most companies,” according to Swissmem, the industry’s association. The country’s iconic watch industry would also face a crisis, potentially needing to raise prices by 15-20% to survive.
Officially, the White House has cited a persistent trade deficit and the high price of Swiss pharmaceuticals as its primary grievances. President Trump has long argued that the U.S. should export more than it imports to prosper. However, this narrative overlooks a crucial detail: the trade imbalance is massively skewed by Switzerland’s role as the world’s leading gold refining hub. The U.S. is a major buyer of refined gold, which inflates import figures, even though Swiss companies capture only a small fraction of the product’s total value. The numbers President Trump points to, therefore, hardly reflect the real economic relationship.
The Swiss Economic Institute (KOF) has outlined two potential futures. A “soft” scenario, where tariffs on pharmaceuticals are negotiated down to 10%, would still cause a 0.3-0.6% annual drop in Switzerland’s GDP. The worst-case scenario, with the full 39% tariff applied across the board, could see the nation’s GDP fall by more than 1%, a significant blow to the stable Swiss economy. With time running out, many Swiss companies fear they will have no choice but to halt exports to the U.S. entirely, as absorbing such a high tariff would make their products unprofitable.
As Bern scrambles for a solution, the focus has shifted to the nature of diplomacy in the Trump era. Former Swiss ambassador Thomas Borer lamented that the crisis might have been avoided if President Keller-Zutter had met Trump in person a week earlier in Scotland, catching him in a better mood. This highlights a growing consensus that traditional negotiation tactics are ineffective with President Trump, who appears to value personal rapport over policy details laid out by negotiators. Desperate to find a way forward, Switzerland is considering concessions such as purchasing more U.S. weapons and energy or boosting investment in the American economy.
With the deadline looming, some are calling for a complete rethink of diplomatic strategy. Borer noted that unconventional approaches may be necessary, even floating the idea of leveraging the positive relationship between President Trump and FIFA President Gianni Infantino to mediate. “With a traditional leader, this would be useless, but with Trump, it might just work,” he stated. The suggestion underscores the unprecedented challenge Switzerland faces: navigating a complex trade dispute where the personal whims of a world leader may matter more than decades of established international protocol.