The Swiss franc is losing value after Trump announced increased tariffs. The tariff rate on Canada is now 35%, up from 25%.

Changes in Switzerland’s Tariff Rates

Switzerland’s goods will face a new tariff rate of 39%. If goods are suspected of being transshipped to avoid duties, there will be an extra 40% tariff. These changes are affecting the market. The updated tariff on Canada starts on August 1. Other tariffs will be effective in seven days. The new 39% tariff on Switzerland directly affects its economy, causing the franc to weaken right away. We expect the CHF to drop further as the market processes this news in the coming days. Traders should consider shorting the franc, possibly by buying put options or taking long positions in USD/CHF. This disruption is significant. Switzerland has a robust trade relationship with the U.S., with exports like pharmaceuticals and chemicals exceeding $67 billion in 2024. The tariffs will hit major Swiss companies hard, damaging a key part of their economy. This serious blow points to a continued bearish outlook for the franc in the next few weeks.

Effect on Swiss Market Index

We believe the Swiss Market Index (SMI) could face a major decline. Companies such as Roche, Novartis, and Swatch Group will struggle with their U.S. sales. Traders might want to buy put options on the SMI or on ETFs that track Swiss stocks. This situation mirrors the market response during the 2018 trade conflict with China, which caused significant equity losses and increased volatility. We anticipate that the Swiss National Bank may need to step in, possibly by cutting interest rates to support the economy, which would put additional pressure on the franc. Amid the uncertainty, expect high implied volatility in pairs like USD/CHF and EUR/CHF. This makes buying volatility a smart strategy. We are considering straddles or strangles to profit from significant price movements as the market assesses the impact. Additionally, we can’t overlook the 35% tariff on Canada, a major exporter of oil and raw materials to the U.S. This will likely affect the Canadian dollar and stocks connected to the natural resources sector. While our focus remains on the franc, this presents a secondary chance to enter bearish positions on the CAD. Create your live VT Markets account and start trading now.

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