Why did Switzerland get hit with a 39% tariff?
US President Donald Trump’s argument is straightforward. He believes trade partners of the United States benefit from broad access to the US market, while often restricting access to their own, creating persistent trade imbalances.
In Switzerland’s case, Trump balked at the Alpine nation’s $48 billion (€41.2 billion) trade deficit, which he said showed Swiss firms were “taking advantage” of the US. For that and the country’s apparent unwillingness to address the imbalance, he put a much higher tariff on Swiss imports than the European Union’s 15%.
At 39%, the tariff rate is the highest among developed countries and may inflict major damage on trade with the US, Switzerland’s most important trading partner. Around 18% of Swiss exports crossed the Atlantic last year.
Despite intense talks and a high-stakes visit to Washington by President Karin Keller-Sutter, Switzerland failed to clinch a framework deal like the EU, Japan or United Kingdom.
Keller-Sutter couldn’t even get an appointment with Trump and instead met with US Secretary of State Marco Rubio, who doesn’t oversee trade policy, and walked away empty-handed.
The tariff, which took effect on Thursday (August 7, 2025), hits luxury and consumer goods hardest, with watches, skincare and cosmetics, precision instruments and chocolate expected to face large price rises in the US.
Why is Swiss gold the problem?
Although gold, along with silver and pharmaceuticals, is currently exempt from Trump’s tariff, the Swiss gold refining sector has come into the spotlight because it plays a surprisingly big role in the economy, making the trade imbalance look much larger.
The Trump administration has counted the billions of dollars of gold that passes through Switzerland every year in its tariff calculation.
On the face of it, the Swiss make a fortune from refining gold from Africa, Asia, Australia and South America.
More than two thousand tons of gold are imported annually, much of it from intermediary banks in London, New York and elsewhere, and later reexported.
Despite being the world’s largest gold refining hub, Switzerland’s gold sector is tiny, with just five major refiners employing around 1,500 people.
While the value of the precious metal they are processing is huge, Swiss refiners say the profit they make on processing gold into bullion bars, investment-grade coins and precision parts for watchmaking, electronics, and jewelry is tiny.
Recent soaring demand for gold globally has also boosted refining in Switzerland, further distorting trade data.
Is Washington misrepresenting Switzerland’s gold trade?
The Swiss National Bank (SNB) argues that gold should be excluded from Washington’s tariff calculation since refiners earn just a small fee for processing the metal.
Most of the value comes from the gold itself, not Swiss labor or production, SNB says.
Although the total value of Switzerland’s trade in gold to the US was worth more than $36 billion in the first quarter of this year — making up two-thirds of the trade deficit — the industry is making profits of just a few hundred million dollars per year.
The remaining trade deficit is mostly made up of the exports of pharmaceuticals, watches and precision-engineered goods.
Simon J. Evenett, a professor of geopolitics and strategy at the Lausanne-based IMD Business School, told Bloomberg that “Gold is special,” as it “isn’t really manufactured in Switzerland. Processed is a better word.”
Despite a call for gold not to be included in the trade balance data, Washington has yet to show any willingness to change course.
How has the Swiss business community reacted?
Switzerland’s non-gold producers argue that they will take the hit from the tariffs, even though they’re mostly not to blame for the imbalance.
Business association Economiesuisse has urged the government to continue talks aimed at cutting the tariffs, which are likely to have a severe impact on economic growth.
Hans Gersbach, an economist at the Zurich-based KOF Swiss Economic Institute, estimated that the levies would cut Swiss GDP by 0.3% to 0.6% over the next year, if they remained in place for long.
Swiss products will soon be uncompetitive for US consumers versus similar goods produced in the EU or Britain, which clinched a 10% tariff deal.
The London-based Capital Economics estimated that negotiators will likely bring the 39% tariff rate down, but that Switzerland would have to accept a higher rate than the 27-member EU bloc.
How will the Swiss respond to Trump’s tariff?
The Swiss executive branch, the Federal Council, held an emergency meeting on Thursday afternoon following Keller-Sutter’s unsuccessful Washington trip.
After the meeting, the council said it is not currently considering tariff countermeasures in response to the 39% tariff.
In a statement, the council said the government would focus on relief measures for export-oriented Swiss businesses and continue talks with Washington to find a solution.
During the most recent talks, a promise to hike investments in the US by $150 billion fell on deaf ears, according to Reuters news agency.
Keller-Sutter’s proposal for a 10% tariff rate was also rejected by US officials, Reuters reported, citing sources in the Trump administration.
To show goodwill against the looming tariff threat, the government in Bern even dropped tariffs on nearly all US imports last year, which gives US producers virtually free access to Swiss markets.
They even floated the idea of importing US liquefied natural gas (LNG), even though Switzerland is a landlocked country, which presents logistical challenges.
Now the voices demanding countermeasures are growing louder. Green Party leader Lisa Mazzone has proposed a 5% export duty on precious metals to counterbalance the effect of Trump’s tariffs.
How will the new tariffs impact the global trade in gold?
With gold itself spared from Trump’s tariff, Switzerland’s refining sector can continue operating without disruption.
Ironically, the 39% levy may help the gold demand internationally as more investors seek safe-haven assets during periods of uncertainty.
However, those wider and ongoing trade tensions have raised costs for shipping, insuring, and financing gold transactions, which could move higher still.
Gold is often shipped in small, high-value consignments. Even modest route changes, like during the recent Red Sea attacks, can add thousands in costs per shipment.
These costs won’t cripple the gold sector, but will eat into narrow profit margins.
Edited by: Ashutosh Pandey
