Bie franca in Switzerland due to US tariffs 39%, panic businesses

This came as a shock to the alpine state. Indexs in the Swiss press indicated that the country was close to reaching a preliminary agreement similar to those signed by the European Union, the UK and Japan, which imposed basic fees of between 10% and 15%. Instead, Switzerland has received one of the highest tariff rates ever given to any country.

This is of great importance, as the US makes up about one sixth of Switzerland's total exports. Businesses breathed freely in April when the country avoided initial plans for a 31% fee, temporarily receiving a 10% tax as the majority of other countries.

Until late Thursday, new tariffs for dozens of countries that have not yet agreed on a trade agreement with the US are expected to take effect on August 7th. Given the precedents set by US President Donald Trump for last minute changes and agreements on deadlines, there is still a possibility that the situation will change.

Another opportunity of relief came as the Swiss Federal Department for Economic Affairs told Reuters on Friday that it understands that the 39% rate will not include the pharmaceutical sector, which is separately experiencing fluctuations due to Trump's recent comments on drug prices. CNBC contacted the White House for a comment.

Impressed

Amid uncertainty, reactions Friday were overwhelming negative.

Switzerland's Federal Council said there were “deep regrets that, despite progress in bilateral talks and Switzerland's very constructive approach from the start, the US aims to impose additional unilateral tariffs on imports from Switzerland.” He added that he continues to seek a negotiated “solution” and is in contact with American authorities.

The processing industry association, Swissm, said the 39% tariff would hit the technology industry, exports and, subsequently, the whole country, stressing that any second franc that enters the economy comes from foreign trade.

I'm shocked. These fees have no rational basis and are arbitrary. This decision puts tens of thousands of jobs in the industry at risk,” said the group's director, Stefan Brupbacher.

Beat Whitmann, chairman and partner at the Advisors Gate, said the news was a “devastating” for the economy and Swiss businesses.

“The U.S. is leading a one-sided and unpredictable tariff fight, and this unpredictable increases a risk advance in financial assets --” -- he said through an email. “This will lead to weakening the Swiss economy, Swiss francs and stock market, especially in the vital export sector. ”

The Swiss government must agree that the time of “selection, exclusive exemptions and agreements” has ended, especially for small and very exposed states, Whitmann added.

The main Swiss exports include chemical and pharmaceutical products, watches and jewelry, chocolates, precious stones and electronics.

Adrian Prettejohn, an economist for Europe in Capital Economics, said in a note that a 39% fee would reduce about 0.6% of Switzerland's GDP, or more if the pharmaceutical sector is involved, but he expected it to be negotiated lower.

Since the Swiss stock market is closed because of the national day, indicators are coming through other channels as the performance of the British company Watches of Switzerland, which dropped almost 9% in morning transactions.

In a Friday note to clients, investment bank analysts Jefferies cited the company, along with Ricchemont and Swatch Group, as among those that would be hit the hardest by this news, especially compared to earlier expectations. But they added that the starting date on August 7th leaves room for “very much changes and last minute settings”.