Here are the impacts on the Swiss economy

Here are the impacts on the Swiss economy


Donald Trump trade war - Swiss Europe consequences

Trump threatens to all of ava and takes measures with devastating potential. What impact on Switzerland?Image: montage watson

The American president threatens Mexico, Canada and China with new customs duties. Soon, it should also target Europe – and therefore indirectly Switzerland.

Remo Hess, Maximilian Jacobi et Niklaus Vontobel / CH Media

Donald Trump multiplied promises during his electoral campaign, sometimes contradictory. In particular, he made the commitment to lower prices for consumers, ensuring that he was going to increase customs duties. However, according to economists, this measure would rather have the opposite effect. Despite these inconsistencies, Trump has now launched a trade war that the Wall Street Journal did not hesitate to call “more stupid of all time”.

Trump wants to impose a 10% tax on Chinese products and 25% on those from Mexico and Canada. Even if he partially fell back on Mexico and Canada, the threat remains – including for the European Union, which he has designated as his next target. By triggering this price offensive, The American president has set up a chain reaction which no one knows how far she will go or who will be affected.

Here are the 8 main questions and answers:

Will Europe avoid customs duties?

Everything suggests that not. This weekend, Trump said he would “certainly” impose customs duties on European products. He described the EU as “terrible” and accused Brussels to “abuse” the United States:

“We have a 300 billion trade deficit”

Donald Trump

In reality, the commercial imbalance amounts to “only” 156 billion euros.

What products will be affected and what will be the consequences?

Either Trump imposes customs duties on specific product categories, as he did for steel and aluminum during his first mandate. Or it erects a generalized price wall, as it now does with China, Mexico and Canada. Before his mandate, he spoke of additional customs duties of 20% on all European products.

Germany, as European export champion, would be particularly affected, including its automotive industry. German companies also sell many pharmaceutical machines and products in the United States. France, for its part, would have a significant impact on its agricultureespecially on wine, cheese and cognac. In addition to Italy, the United Kingdom is one of the main European trade partners in the United States. However, Trump suggested that he could exempt him from this new taxes.

The consequences of new customs duties are relatively clear: they will lead to an increase in prices and a decrease in exchanges, which will result in a loss of turnover and, in the medium term, jobs.

How does Europe intend to react?

In Europe, some leaders no longer chew their words. Polish Prime Minister Donald Tusk described this trade conflict as “completely useless and stupid” in Brussels on Monday. For his part, French President Emmanuel Macron said that in terms of trade, if Europe was “attacked”, it was to react and “be respected”.

Previously, a spokesperson for the European Commission, who represents the 27 member states in commercial matters, said the EU was ready and would react firmly. The exact retaliation measures remain confidential, but the list developed in 2018, during the first commercial showdown with Trump, could be reactivated. The EU would then specifically target states where the American president has many voters.

The EU could notably impose customs duties on the bourbon of Kentucky and Tennessee, as well as on the Harley-Davidson motorcycles. Other American products, such as Levi’s jeans or Florida orange juice, are also on the list. These targeted measures would have a limited impact on the economy, but a significant political scope.

In her speech to the Davos World Economic Forum, the president of the European Commission, Ursula von der Leyen, also underlined the dependence of aircraft manufacturers and producers of American drugs vis-à-vis European suppliers. The EU could also take measures against American digital companies, such as X of Elon Musk, against which certain procedures are already underway.

Finally, Europe is also a large buyer of American arms. As part of the reset of EU countries, tens of billions are invested. France has been campaigning for a long time to favor the purchase of European systems rather than American armaments. Such a request would undeniably take on a new momentum in the event of a trade war.

Who will win the trade war?

Person. It is well known that commercial conflicts and customs duties still create losers on both sides. Especially since Europe and the United States are actually the closest allies for each other, both military and economic. However, with its population of 450 million consumers, the EU represents a major competitor, even for the American superpower.

In the event of intensification, world competitors of the West, China and Russia, would take advantage of a weakening of transatlantic economic relations.

Will the Swiss economy also suffer the consequences?

The impact of customs duties that the United States imposes on other countries would be relatively low for Switzerland at first glance, explains Hans Gersbach, co-director of the Center for Conditional Research at ETH Zurich (KOF) . According to Gersbach, it could even offer New export opportunities, the products of competitors becoming more expensive.

According to KOF calculations, the short -term effects on Switzerland are “very low” or even “close to zero”. However, this does not mean that the situation will remain in this way. The consequences could become “sensitive and measurable in a negative way” if the supply chains in North America were disturbed in a prolonged way-which would also affect Swiss companies integrated into these channels, with factories in the United States or Switzerland .

According to the KOF, Switzerland could face “sensitive and measurable” consequences if Canada and Mexico react by customs tariffs, that Trump intensifies the situation, and that the three former good neighbors remain for a long time in the trade war launched by Trump. A conflict that would end up harming the three countries concerned – as well as the world trade as a whole.

If Trump adopts an approach similar to that he could use against Canada and Mexico, by imposing a 10% rate on all EU goods, the consequences would be considerable, and Switzerland would suffer the indirect repercussions. According to a study by Goldman Sachs, the EU could lose about 1% of its GDP.

Germany, as a former world leader in exports, would be even more impacted. In particular, the automotive industry, already faced with the challenges linked to the transition to electromobility, would suffer considerably. This would be bad news for the Swiss industry, which is closely linked to the German automotive industry and already undergoes the effects of this crisis.

How does Switzerland react to the threat of customs duties?

The State Secretariat for the Economy (SECO) indicates that it “monitored carefully” the situation, but the authorities do not seem particularly concerned. Indeed, during Trump’s first term, Switzerland had “excellent relations” with the United States government, according to Seco.

Despite these “excellent relations”, the United States imposed in 2018 tariffs on steel and aluminum. Metals from Switzerland were then subject to the same conditions as those of the EU, without distinction. In response to American customs duties, the EU has adopted measures to protect its own market, also affecting Switzerland, considered as a third country. So, The heavy Swiss industry has been penalized twice.

To prevent American customs duties from being passed again on Switzerland by the EU, Switzerland is, according to SECO, in contact with “the competent authorities of the European Commission and the Member States”.

According to Jean-Philippe Kohl, the vice-director of the industrial association Swissmem, this is not the only option, however: after several years of negotiations with the EU, new bilateral agreements are about to be concluded. If the EU reintroduced customs duties on imports from Switzerland, the chances of success of the new bilateral package during a popular vote would be considerably reduced.

Have Swiss companies have taken short by Trump?

“Trump has announced its intentions,” said Simone Wyss Fedele, director general of the Swiss organization promotion organization and Switzerland Global Enterprise (S-GE). Many Swiss companies with links with the United States have therefore prepared upstream, by filling their local stocks for example. They are thus less dependent on imports from the United States for a few weeks:

“Trump has no interest in maintaining customs tariffs for a long time”

Simone Wyss Fedele

He uses them as a lever to quickly get agreements. For example, he demands that Mexico and Canada take action against the influx of illegal drugs to the United States. If an agreement is concluded between the neighbors, commercial restrictions could be lifted quickly.

Does the share price drop in Switzerland?

The Swiss Stock Exchange could experience a sharp decline if the US markets fell considerably, some investors that could sell before thinking. Or else, local investors could first seek to secure the important gains made in January, thus resulting in a drop in stock market indices with their sales.

However, overall, The Swiss Stock Exchange should react less to Trump customs duties than other European marketsaccording to Karsten Junius, chief economist of Bank J. Safra Sarasin. Indeed, many Swiss companies have already taken measures to respond to what Trump seeks to accomplish with his prices: they have established factories in the United States. In addition, as Junius specifies, small and medium Swiss enterprises should be less impacted by customs duties, because they sell mainly in Europe rather than in the United States.

The situation would be different if Trump maintained his customs duties in the long term and thus caused a recession in Europe. A new deterioration of the situation in Germany would, according to experience, have major consequences for many Swiss exporting companies – and, of course, on their stock prices.

Translated and adapted by Noëline Flippe

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