The Swiss president is leaving Washington without a tariff deal. Currently, the United States has imposed a 39% tariff on Swiss goods due to a trade deficit of $40 billion, which the U.S. considers too high.

Impact on Swiss Exports

These tariffs significantly affect Swiss exports. Sectors like watches, chocolate, machinery, and some non-pharmaceutical goods will face higher costs when entering the U.S. market. This situation is likely to make Swiss products less competitive and disrupt trade between the two countries. Without a tariff agreement, major Swiss exporters feel immediate pressure. Companies such as Swatch Group and Richemont, which depend on the U.S. for much of their watch sales, may see their stock prices drop in the coming weeks. Traders might consider buying put options on these companies to profit from this potential decline. Last year, the Americas market contributed significantly to luxury goods sales, with some reports indicating that it accounted for over 20% of Richemont’s revenue. The new 39% tariff on non-pharmaceutical goods represents a hefty cost that could hurt profit margins and reduce demand. This situation might make short positions on these export-heavy stocks a sensible choice. The uncertainty also affects the entire Swiss Market Index (SMI). We might see the SMI drop as investors rethink Switzerland’s economic outlook following this diplomatic failure. This could lead to a weakening of the Swiss Franc against the U.S. dollar.

Trade Deficit and Economic Impact

In 2024, the U.S. goods trade deficit with Switzerland exceeded $42 billion, primarily in pharmaceuticals but also concerning goods like watches and machinery. A significant decline in these exports could negatively affect Switzerland’s trade balance and pressure the Franc downward. Although the Franc is usually seen as a safe haven, a direct economic hit could weaken it from its current levels. We can also expect increased market volatility, creating chances for options traders. A similar trend occurred during the U.S.-China trade disputes in the late 2010s, where tariff uncertainties caused significant price fluctuations for months. Traders might look at buying straddles or strangles on the SMI to navigate this anticipated volatility without taking a specific stance. Create your live VT Markets account and start trading now.

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