Switzerland Reels From US Tariff Shock

Its small size and neutrality proved to be no shield.

- Lionel Laurent

After the European Union, it's now Switzerland's turn to bemoan humiliation and surrender at the hands of the Trump administration. Politicians and companies are reeling from the shock of a new tariff of 39 percent, well above the EU's 15 percent, which could cost the country 1 percent of its gross domestic product.

For Swiss drugmakers like Novartis, the stay of execution granted to the sector feels temporary, with a possible 25 percent pharmaceutical tariff to come if no deal is done. Local media have compared it with the Swiss defeat at Marignano at the hands of the French in 1515.

This is obviously not an emerging-market-style crisis moment: Switzerland is one of the richest countries in the world, and Rolex watches are somewhat less price-sensitive than Volkswagen cars.

The Swiss stock market, which quickly recovered early losses, is taking solace in the fact that 39 percent feels like a blustery prelude to more concessions and a handshake. Already, the Alpine country is scrambling to offer more goodies to an irate US administration. One might imagine more EU-style pledges are coming, such as buying more US energy.