Switzerland Is Vulnerable If Trump Wields Tariffs, Schlegel Says

This content was published on January 23, 2025 - 13:54

2 minutes

(Bloomberg) — Switzerland’s commerce with the US is significant and any tariffs would meaningfully impact its economy, according to Swiss National Bank President Martin Schlegel.

The central bank chief spoke to a panel at the World Economic Forum in Davos on Thursday in the same week when Donald Trump entered the White House and threatened to impose measures on Europe. The US president hasn’t yet specified Switzerland as a possible target.

“The US is a very important trade partner for Switzerland,” Schlegel said. “Switzerland is a small, open economy, it’s really reliant on trade. We have a huge part of GDP that is actually exported. So tariffs would certainly not be good for Switzerland.”

The prospect of Trump’s economic agenda rocking world trade has been a frequent theme in Davos, especially in the wake of his threats of measures against Canada, Mexico, China and Europe.

Schlegel spoke on a panel focused on the outlook for consumer prices. He said that “the inflation forecast is well inside the range over the whole forecast horizon.” Officials projected last month that consumer-price growth would end up at 0.7% at the end of that period in the third quarter of 2027.

That outlook suggests the SNB has started the year in a sanguine position despite a volatile backdrop for the global economy that could impact the franc, whose strength has weakened inflation.

In contrast to the euro area, where officials are still cagey about the lingering danger there, Switzerland faces the threat that it could be too slow. Consumer-price growth in January could weaken from 0.6% in December to just 0.2% in January, according to Bloomberg Economics.

To control the strength of the franc, the SNB stands ready to intervene in the foreign-exchange market if necessary, Schlegel told Bloomberg Television this week. He also said — and reiterated on Thursday — that he can’t exclude bringing borrowing costs negative again. The current interest rate is at just 0.5%.