Donald Trump won a victory of unexpected magnitude. It was not overall economic development that was decisive, but rather the question he repeatedly asked: “Are you better off today than you were four years ago?”
As the cost of living has increased by around 25%, many households answered with a clear no. The response to the government in place was immediate.
The consequences for Switzerland
Currently, the Swiss economy is growing fairly stable. But it faces weak foreign demand. Switzerland’s most important trading partner, Europe, is expected to return to slightly higher growth next year, supported by rising real wages, which supports Swiss exports. Thus, the Swiss economy could achieve trend growth of around 1.5%.
The American economy remains extremely strong. The Trump administration’s expected policies, with lower taxes, less regulation and higher tariffs, are seen as slightly positive for U.S. growth. However, higher tariffs could have a negative impact on Swiss exports.
SNB rate cut
The Swiss National Bank (SNB) can be expected to cut rates further due to low inflation and concerns about economic dynamics in the Eurozone. We anticipate two more rate cuts in this cycle, one in December and the other in March 2025.
The need for further rate cuts will depend on developments in exchange rates. The USD/CHF is mainly influenced by rate differentials. Deeper rate cuts by the US Federal Reserve (Fed) relative to the SNB could reduce the attractiveness of the US dollar and push the exchange rate down to around 0.80 next year. The SNB is likely to allow a gradual depreciation of the USD/CHF in this direction.
However, it could react more noticeably to a significant depreciation of the EUR/CHF exchange rate below 0.90. In this case, the SNB could further lower the policy rate to zero to prevent the franc from appreciating further.
The incidence of customs duties
The Swiss equity index is forecast to achieve profit growth of 7.5% in 2024 and 2025. The financial sector is expected to drive profit growth this year, with a broader base in various other sectors next year .
If the Trump administration imposes high tariffs and new trade restrictions, it could negatively impact the global economy, particularly cyclical export-oriented companies, as well as stocks that have a share high exports to the United States and a high share of value added in Switzerland or outside the United States.
