Swiss President Rushes To Washington In Last Ditch Attempt To Appease Trump And Lower 39% Tariff

Swiss President Karin Keller-Sutter (yes, president Karin) and her economy minister Guy Parmelin scrambled to fly to Washington on Tuesday in a last-minute bid for a deal to lower the 39% tariff imposed last week by Donald Trump.

The trip is to “facilitate meetings with the US authorities at short notice and hold talks,” the government said in a statement. Keller-Sutter’s office declined to say whether she expects to meet the American president and what trade concessions she might bring before Thursday’s deadline to implement the levy.

The scramble follows a day after the Swiss government said it is determined to win over the US on trade after last week’s shock announcement of 39% tariffs on exports to America.

“Switzerland enters this new phase ready to present a more attractive offer, taking US concerns into account and seeking to ease the current tariff situation,” it said in a statement on Monday, highlighting its foreign direct investments and research and development push in the US. It also excluded countermeasures for the time being. 

With the new levies – the highest among industrial nations – scheduled to go into effect on Thursday, President and Finance Minister Karin Keller-Sutter convened an emergency meeting of the governing Federal Council to discuss how to proceed. Negotiators with the Swiss State Secretariat for Economic Affairs have already reached out to their US counterparts to try and find a way forward. Bern is focusing on getting at least a longer timeline than Thursday, according to an official close to the talks, adding that anything improving the current situation would be a win.

Trump’s tariff decision last week stunned the Swiss after talks ahead of the Aug. 1 deadline were said to look “promising.” A Thursday night call instead focused on Switzerland’s trade surplus in goods with the US. The Swiss government stressed on Monday that the overhang “is not the result of any ‘unfair trade practices’.” 

Switzerland’s outsized gold exports are partly to blame for the distorted trade balance. The country is the world’s biggest refining hub for the precious metal, with billions of dollars worth of gold constantly flowing into and out of the nation. Pharmaceuticals, coffee and watches are the other main drivers. 

According to Bloomberg Economics, if the 39% tariff rate came into effect across the board – especially on pharmaceuticals – that would put up to 1% of Switzerland’s economic output at risk over the medium term.

The paradox faced by Keller-Sutter and her Economy Minister, Guy Parmelin, is that any concessions may be politically costly without meaningfully curbing the trade deficit with the US that Trump has criticized. 

“Switzerland has to get creative,” said Stefan Legge, a trade policy researcher at St Gallen University. He did not point out why it has to get creative, because if one listened to all the “expert” economists, the US had no leverage at all in tariff negotiations. Perhaps that wasn’t quite the case… 

In any case, Keller-Sutter’s shuttle diplomacy follows an emergency government meeting on Monday where ministers agreed to present a new offer to the US. Gold, agriculture, planes, drugs, and energy are just some areas that may feature in any talks.

Here’s an overview of some concessions the Swiss could make according to Bloomberg:

Agricultural Tariffs

• Switzerland abolished industrial tariffs in 2023, leaving levies on only 5% of its imports. The only area where the Swiss maintain tariffs is agriculture, motivated by a politically charged belief in self-reliance. Any concessions would surely infuriate farmers, who have previously pledged to “vehemently fight” any changes to the current regime. While the political pain would be large, the win for Trump would be rather symbolic since agriculture amounts to a small fraction of the economy.

Gold

• Trump’s aides claim that Switzerland’s out-sized trade deficit with the US is why the president imposed such high levies. On average, two thirds of last year’s $38 billion deficit was due to shipments of bullion. That’s because of the price of the metal itself rather than any added value by Swiss refineries, which largely focus on resizing bars. “Gold is special,” said Simon J. Evenett of IMD Business School in Lausanne. “It isn’t really manufactured in Switzerland. Processed is a better word.” 
• One fix could be a high tariff, say of 50%, just on gold, hitting refineries but with a limited wider economic fallout. Alternatively, handing over buillon trade to the central bank or another state institution could provide a justification for taking it out of statistics on both sides of the Atlantic. But it’s not clear if this would appease Trump.

Planes

• Switzerland is currently buying 36 F-35 fighter jets from Lockheed Martin Corp. for its air force, but has run into disagreements over the price. According to the Swiss, a fixed price of 6 billion francs ($7.4 billion) was contractually agreed, which voters backed in a plebiscite, but the US now wants as much as $1.3 billion more to account for higher production costs and inflation.
• Accepting the higher charge, and possibly symbolically ordering one or two more planes, could help convince Trump, given how arms purchases featured in his other trade deals. But voters might balk at that.

Drugs, Investments and Energy

• One of Trump’s major peeves is pharmaceuticals, where Switzerland specializes. Novartis AG and Roche Holding AG have already announced plans to invest huge sums in the US over the next few years, and the Swiss government could pressure them to cut prices there too. While that might align with the interests of the companies themselves to to get out of Trump’s crosshairs, officials can’t actually force them to do so. An easier approach could be to gather pledges for US investments by Swiss companies. Such a package could be combined with a pledge to buy US energy, in particular liquefied natural gas. While the landlocked country is focused on hydroelectric and nuclear power, it does use a small amount of gas, primarily in the winter.
• “We could buy oil, arms and LNG and we could give concessions on agriculture and at least give our best endeavor to put pressure on Swiss pharmaceutical companies to lower prices,” said Thomas Borer, a former Swiss diplomat.

Something Else 

• Switzerland’s rude awakening in its diplomacy with Washington has forced officials to realize that winning over Trump himself is key, rather than talking to underlings. So perhaps a gesture such as a present to charm the president could do the trick, said St Gallen’s Legge. He cited the example of the birth certificate of Trump’s German grandfather that Chancellor Friedrich Merz brought him in June. “Maybe it would be best to give him a golden Swiss watch,” Legge said.