US trade tariffs: an obstacle for Swiss companies?

Would anyone have imagined four years ago that Donald Trump, who was then voted out of office as the 45^th president of the United States, would return to the White House? This is exactly what he has done on January 20, 2025, when inaugurated as 47^th US president. It will probably take a few months until the consequences for the economy and global politics of this event become apparent. However, it is already clear that if the new Trump administration implements the measures on its agenda, Swiss companies will not be left unscathed.

The US export market is indispensable for Switzerland

Many investors drew confidence from Trump’s impressive comeback. Global stock markets reacted euphorically the day after his election victory in early November 2024. This gave the US stock market a boost for weeks afterwards. The Swiss stock market, which had been trending downward since autumn, also recovered at first.

However, the positive mood felt by many investors in European stocks vanished instantly when they heard that Trump's Republican party had also won a majority in the Senate and the House of Representatives, the two chambers of the US Congress. This stoke fears that Trump, who during his election campaign kept announcing to impose import tariffs on China and Europe, could more easily push those through Congress, which has to approve new laws.

Concern also spread among investors in Swiss stocks because Switzerland sells goods worth over CHF 50 billion a year to the US, its most important export market.
 

Many shareholders in Swiss companies are particularly concerned about the hefty tariffs proposed by Trump on goods exported from Mexico to the US. In recent years, a number of Swiss companies have set up their own production facilities in Mexico in order to be able to supply the US more cost-effectively – for example, the chocolate producer Barry Callebaut, the logistics company and screw supplier Bossard, the industrial supplier of technical components Dätwyler, and the packaging specialist SIG.

In our opinion, Swiss companies will be less affected by the drastic tariffs that Trump wants to impose on Chinese goods. This is because these companies via their production facilities outsourced to China meanwhile largely supply China itself. One exception to this is the computer-accessories manufacturer Logitech, which still sells more than half of its goods produced in China outside the People's Republic. However, over the last five years the company has significantly reduced the proportion of its products manufactured in China and intends to continue diversifying away from China should the punitive tariffs being threatened become a reality. The pandemic, which resulted in a widespread and prolonged paralysis of the Chinese economy in 2020, triggered the global trend of "nearshoring", whereby companies bring their production back to their local areas. The Swiss storage and materials handling company Kardex, for example, has benefited from this.

The Trump administration could be shooting itself in the foot

It remains to be seen to what extent the new Trump administration will actually implement the trade tariffs it has envisioned for China and Europe. After all, it is also putting a lot at stake, as China and Europe have long been major buyers of goods produced by the US.

In addition, new import tariffs could fuel inflation in the US again. This would be bad for the currently still solid consumption in the US, and thus for the US economy, which in turn could prompt the US Federal Reserve to slow down the monetary easing it initiated last September. This is hardly in the interest of Donald Trump, who is keen on economic growth.

More than 120 Swiss companies investigated for adverse consequences of trade tariffs

In recent weeks, we have examined in detail a total of 121 Swiss companies with a market capitalization of at least CHF 500 million each for the potential consequences of new US trade tariffs. Our analysis focused on the possible impacts of any tariffs on companies' production, while excluding the consequences for the economy as a whole.

For this purpose, we first determined how much of the companies' sales are generated in the US (see table below). Adjusted for market capitalization, our estimates put the average at 30%. We then examined the delivery channels to the USA.
 

Swiss companies*: estimated sales share US

Our in-depth investigation found that around two-thirds of companies are unlikely to be significantly affected if new trade tariffs were to be imposed. This is because they either do not trade in goods with the US – for example all real-estate companies, most medium-sized banks and insurers, telecommunications companies, tourism companies such as Jungfraubahn or pure retailers such as Galenica – or they produce directly in the US, such as the chocolate manufacturer Lindt & Sprüngli and the industrial companies Georg Fischer and Sulzer. The remaining third of the companies we analyzed do not supply the US from local production facilities. This means they could potentially be disadvantaged by new trade tariffs.

However, the trade tariffs announced by Trump are not yet set in stone. We see some room for maneuver in their actual implementation. We also believe they will take longer to be put into practice than many worried investors currently fear. This should give Swiss companies time to adapt to the changed trading conditions.

Swiss SMEs have a workaround in store

In the past already, many Swiss SMEs have proven their ability to reinvent themselves time and again. On the one hand, they made the most of their remarkable innovative strength. On the other hand, they made up for competitive disadvantages – such as the comparatively high wages in Switzerland or the strength of the Swiss franc, which has lasted for more than two decades – with the first-class quality of their products, highly efficient processes, and a lean cost structure.

We spoke to management representatives from the Swiss SMEs that supply the US with goods that are not manufactured in the country. From their responses regarding the subject of US import tariffs, we understand that they would be willing and able to set up production facilities in the US within one or two years. Logitech's management, for example, told us they have already relocated 20% of their hardware and software production in China since the pandemic, and could reduce it further within a reasonable timeframe. We take this as confirmation that Swiss SMEs are flexible and are not willing to let themselves be defeated by threats of trade barriers.