The United States has set a 39% tariff on Switzerland, leading to a drop in the value of the Swiss franc (CHF). Other recent tariff changes include a 20% rate on Taiwan and 19% on Cambodia, Thailand, Malaysia, Vietnam, and Indonesia. This tariff increase is part of a larger strategy, which recently raised Canada’s tariff from 25% to 35%. Other countries affected include Australia, New Zealand, Israel, Venezuela, and Turkey, with tariffs between 10% and 15%.

Geopolitical Tensions

These tariff changes occur amid rising geopolitical tensions and shifting trade policies. The increased tariffs are likely to affect trade balances and have already impacted currency markets, particularly the Swiss franc. Traders and market analysts are closely monitoring these developments. The Swiss franc has fallen more than 3% against the dollar in early trading, a swift decline not seen since the Swiss National Bank’s policy shift in 2015. We expect ongoing currency volatility, which could create trading opportunities for those who are ready for sudden changes. In the coming weeks, traders might consider buying options to manage this uncertainty. Put options on the USD/CHF pair could guard against further weakness of the franc, while call options might be used to bet on continued strength of the US dollar. Using options helps define risk in a situation where policy news can change asset values rapidly.

Impacts of Tariffs

These tariffs aren’t just a concern for Switzerland. The tariffs on Canada and key Asian partners will likely pressure their currencies too. We remember the risk-off sentiment during the 2018-2019 trade disputes, which generally favored the US dollar. A potential strategy could involve shorting a basket of affected currencies, including the Canadian dollar and Thai baht, against the dollar. We should also consider derivatives linked to Swiss stocks, especially in the pharmaceutical and luxury watch sectors. These industries made up nearly 60% of Swiss exports to the US in 2024 and are quite vulnerable. Purchasing put options on the Swiss Market Index (SMI) could help protect against a broader market decline. Attention now turns to the Swiss National Bank (SNB), as the market anticipates a possible emergency response to stabilize the franc. Any unexpected action or rate cut could significantly impact short-term interest rate futures. Given their history of significant interventions to weaken the franc in the early 2020s, the SNB has the power to act decisively. Create your live VT Markets account and start trading now.

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