The Trump administration’s tariff policy is expected to lead to rising prices, increased unemployment, and accelerating inflation, and it could even trigger a balance of payments crisis. This situation presents serious strategic risks, particularly for highly specialized and export-reliant economies such as Switzerland.
Escalating U.S.–China trade tensions raise global risk
The intensifying trade war between the United States and China is driving significant global economic risks. Under a likely baseline scenario, the U.S. economy is projected to slide into a recession due to growing uncertainty and mounting tariff burdens. This would have a direct impact on many industrial sectors and indirect consequences for major exporting countries.
Sharp import declines and industrial goods price surges
Tariff-driven reductions in imports are expected to push up prices for industrial goods sharply, making some imported products economically unviable. Disruptions in trade of intermediate goods would particularly affect the automotive, battery, machinery, chemicals, furniture, toy, and metals sectors.
Under this scenario, U.S. consumption would slow, unemployment would rise to 6%, corporate bankruptcies would increase, and inflation would jump from 2.4% in March 2025 to 4% by year-end.
A more severe risk: balance of payments crisis
A more pessimistic risk scenario envisions a full-fledged balance of payments crisis. The U.S. trade deficit is currently financed by foreign capital inflows. If confidence in the U.S. dollar as the global reserve currency were seriously undermined, these flows could stop or reverse, resulting in a sharp depreciation of the dollar.
As a result, import costs would rise even further, U.S. Treasury yields would increase, public borrowing costs would climb, and the economy would fall into a deeper recession.
Some early indicators are already emerging. Since April 2, the dollar has dropped from 0.93 to 0.88 against the euro, Treasury yields have climbed by 50 basis points, and the S&P 500 index has lost 7.6% of its value since the start of the year.
Even if tariffs are lifted, softened, delayed, or replaced by new trade agreements, the overall signal is clear: the current administration is willing to take substantial risks with both U.S. and global economic and financial stability.
China’s domestic demand mitigates impact
In China, the tariff shock is being partly absorbed by domestic economic stimulus. This is proving effective, as domestic sales account for 81% of industrial companies’ revenue, while direct exports to the U.S. only account for 2.7%.
China looks to strengthen multilateral trade alliances
On the fiscal side, China may shift its support to demand-oriented measures. Should the trade war escalate further, the fallout could affect other trading partners. In response, China is actively working to restore and strengthen ties with export-oriented, multilateralist economies such as Japan, South Korea, Southeast Asia, and Europe.
However, such efforts must also include addressing concerns about unfair trade practices, particularly accusations of dumping, in order to build lasting trade relationships.
Switzerland’s strategic exposure to global trade shocks
Switzerland finds itself in a particularly vulnerable position between the two economic giants. In recent years, Swiss exports to China have steadily increased, reaching 11% in 2023, while exports to the U.S. accounted for 15%, despite a slight decline.
Sectors most affected by tariff tensions – chemical and pharmaceutical products, precision instruments (such as medtech), metals, and metal goods – represent over 60% of total Swiss exports. This level of dependency makes the Swiss economy highly susceptible to international trade disruptions.
Swiss exporters must adapt to an uncertain global landscape
Given the current global trade volatility, Swiss exporters must remain vigilant and proactive. Strengthening innovation, diversifying markets, and building strategic partnerships with reliable, multilateral economies will be essential to maintaining competitiveness and resilience in the face of global uncertainty.
