Swiss markets opened the week on a negative note as the announcement of new U.S. tariffs sparked a sell-off in key sectors, notably impacting Swiss blue-chip stocks. The SMI index fell around 1.5%, mirroring a similar drop in the broader Swiss All Share Index. Investors are reacting to the 39% tariff set to hit Swiss exports to the U.S., a move that disproportionately affects smaller firms and iconic sectors such as watchmaking and precision tools.
A report from Vontobel, a Swiss asset manager, highlighted that lower-end watch exports and specialized machinery producers would be the most vulnerable. These companies are already under pressure due to weakening demand from Europe and China, an overvalued Swiss franc, and competition from regions enjoying lower tariffs. Vontobel described these overlapping challenges as a “highly toxic cocktail” for small and medium Swiss manufacturers.
Economist Gianluigi Mandruzzato of EFG Asset Management noted the tariffs threaten about 10% of Switzerland’s economy, increasing the likelihood of a recession. He added that the resulting deflationary pressures would complicate monetary policy for the Swiss National Bank, which already holds interest rates at zero. The economist also expressed uncertainty about whether a revised trade deal with the U.S. could be struck before the August 7 implementation deadline.
Despite the bleak outlook, analysts are cautiously optimistic that Switzerland could still negotiate a more favorable tariff structure. One potential path involves increasing Swiss investment in the U.S. or boosting imports of U.S. energy. Should the 39% tariff remain, companies in the most exposed sectors could see a severe hit to earnings, prompting investors to consider shifting capital away from Swiss markets.
Meanwhile, broader European markets saw mixed reactions. While Swiss stocks slumped, U.K. lenders like Lloyds and Close Brothers surged following a favorable Supreme Court ruling and a regulatory update that eased investor concerns over car loan mis-selling. This contrast underscores how localized regulatory and trade developments are influencing investor sentiment across European markets.
Source: cnbc