Switzerland’s GDP grew by 0.1% in the second quarter of 2025, meeting expectations. The growth for the previous quarter was revised down from 0.5% to 0.4%. Year-on-year, GDP rose by 1.2%, below the expected 1.4%. The earlier annual growth rate was adjusted from 2.0% to 1.8%.

Economic Growth Amid Challenges

After adjusting for sporting events, GDP also saw a 0.1% increase in Q2, following a 0.7% rise in the first quarter. Despite facing challenges, the Swiss economy continues to show modest growth. The introduction of 39% tariffs poses a challenge for future economic performance. We will closely monitor how these tariffs affect the economy moving forward. Current data shows the Swiss economy is mostly stagnant. While the 0.1% quarterly growth prevents a contraction, the downward revisions and the shortfall on the yearly figure indicate weak momentum. This fragile state makes the economy susceptible to external shocks.

Impact of 39 Percent Tariffs

The key focus is not just on past data but the future impact of the 39% tariffs. The United States is a vital export market for Switzerland, making up over 16% of total Swiss goods exports in 2024, with pharmaceuticals and watches being major sectors. This significant hit will likely put pressure on corporate earnings and investment plans for major companies in the Swiss Market Index (SMI). Given the uncertainty, there is an opportunity to invest in volatility. Implied volatility on the SMI and currency pairs like EUR/CHF may be mispriced before the tariffs take effect. We should think about buying straddles or strangles to prepare for a large price move, regardless of its direction. Looking back at the trade disputes from the late 2010s, we saw markets respond sharply to tariff news, resulting in significant but unpredictable price swings. Having options was a better strategy than simply betting on the direction of equities or currencies. The Swiss Franc is in a complex situation, offering trading opportunities in the FX options market. A blow to the export economy is generally negative for the franc, but its safe-haven status might attract capital if tariffs lead to broader global risk aversion. This tug-of-war could lead to sharp and unpredictable movements in currency pairs like USD/CHF, making long volatility strategies appealing here as well. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now