Zurich: Switzerland’s economy contracted in the third quarter of the year, suffering from high US tariffs which abruptly curtailed exports across the Atlantic, the economy ministry said on Monday. Swiss gross domestic product (GDP) dropped by 0.5 percent between July and September from the previous quarter according to preliminary data, a bigger fall than market analysts had anticipated.
According to Bangladesh Sangbad Sangstha, key economic sectors such as chemicals and pharmaceuticals saw sharp declines, while the service sector performed below average. The economic downturn was a direct response to US President Donald Trump’s decision in August to impose an added 39-percent duty on imports of Swiss goods, among the highest in his global tariff campaign. This decision initially stunned Switzerland and contributed to the economic contraction.
However, recent developments offer a glimmer of hope. The US and Switzerland announced on Friday that they had reached an agreement to significantly lower the tariffs, with Switzerland committing to invest $200 billion in the US as part of the deal. This new framework agreement reduces the tariff on Swiss products to 15 percent, as confirmed by the White House. The agreement is expected to alleviate fears of any long-term impact on Switzerland’s industries, including its renowned watch industry and machine tool sector.
Prior to the tariff reduction, Switzerland had warned of an economic slowdown in 2026, partly due to the high tariffs. The watch industry experienced a surge in exports in July before the tariffs took effect, but then suffered declines of 23.9 percent in August and 55.6 percent in September, as reported by the country’s watchmakers’ association. Additionally, Swissmem, the employer federation, reported a 14.2-percent drop in Swiss exports to the US during the third quarter compared to the same period last year.
Despite the relief brought by the new agreement, concerns remain over the strength of the Swiss franc against the dollar, which makes Swiss products more expensive for American consumers. Ipek Ozkardeskaya, a senior analyst at Swissquote, noted that while the resolution of the tariff issue is positive, the strong franc poses challenges for Swiss businesses. “The good news from the US tariffs was counterbalanced by the franc’s persistent strength,” Ozkardeskaya commented. “The strong franc sure sounds like a first world problem — and it is — but it has concrete implications for businesses.”