Swiss pharmaceutical industry particularly vulnerable to Trump tariffs

Pharmaceuticals account for 60 percent of all goods exported from Switzerland to the USA. This means that significantly more medicines go to the USA than are imported from the USA to Switzerland. It is well known that such trade surpluses are a thorn in Trump's side.

The industry is therefore susceptible to tariffs, according to economists at UBS in a study published on Monday. In their opinion, such tariffs would be a problem. In the longer term, trade barriers could lead to pharmaceutical companies moving their production and research departments to the USA. "Such a relocation would have a significant impact on Switzerland in terms of value creation and tax revenues."

However, the experts put this into perspective. In their opinion, demand for price-inelastic pharmaceutical goods would only react slightly in the short term, even if tariffs were introduced. In addition, some large pharmaceutical companies are already producing locally in the USA. The expansion of new sites would not happen overnight, but would take several years.

Growth despite everything

All in all, the UBS experts continue to forecast economic growth of 1.5 percent (adjusted) for the Swiss in the current year despite the Trump administration's policies. "However, in the event of a very aggressive trade policy with comprehensive tariffs, both the global and Swiss economies are likely to grow at a significantly slower rate," they qualify.

Massive tariffs on German cars, for example, could have an impact on local suppliers to the automotive industry. The medtech sector could also be affected, according to the data.

The watch industry, on the other hand, has less to worry about. "The effect of higher prices is likely to be minimal for luxury watches, as demand is relatively price inelastic," say the experts. A relocation is also unlikely.

What do services count for?

In general, there are good reasons for Trump to spare Switzerland, they continue. This is because the balance of trade in goods is negative for the USA. However, if services are included, the situation looks much better. From this perspective, the trade balance is almost balanced.

Trump's predecessor Joe Biden also attested to this for Switzerland last November. However, it is "uncertain whether the Trump administration will use the framework established under President Biden to assess the bilateral framework", according to the economists.

In their opinion, however, the high level of direct investment by Swiss companies and their high number of employees in the US could also be a plus point for Switzerland. It is estimated that Swiss companies employ 300,000 to 400,000 people in the United States.