A Temporary Reprieve

Notably, pharmaceuticals and gold — sectors where Switzerland primarily handles refining and certification — are temporarily exempt from the tariff. The pharmaceutical industry, which accounts for nearly half (48 percent) of Swiss exports to the United States as of 2024, has also been spared for now. This is likely because the US still relies on Swiss pharmaceutical imports, especially in critical areas like patented cancer treatments.

However, this reprieve may be temporary. Trump is taking aim at other sectors, including watches (7 percent of Swiss exports), precision instruments (6 percent), and machinery (5 percent), all of which combined represent less than 40 percent of pharmaceutical exports. This is a calculated pressure tactic aimed at forcing Bern to address the US’s $38.5 billion trade deficit with Switzerland — 3.2 percent of Washington’s total trade deficit in 2024.

Despite its modest size, with a population of nine million, Switzerland is an economic heavyweight — one that has perfected the art of playing featherweight. If it belonged to the European Union, it would be the bloc’s seventh-largest economy, ahead of countries like Belgium and Sweden that have bigger populations. The Swiss franc is a major international currency, accounting for about 5 percent of foreign exchange trading.

Historically the Swiss strategy has been to stay friendly with major global powers while exploiting the rifts between them. During both world wars, Switzerland leveraged its neutrality to build a powerful export economy and banking sector, maintaining profitable ties with both the Allies and Axis powers.

After 1945, Switzerland faced pressure over its close economic ties to Nazi Germany. The United States froze Swiss assets, blacklisted companies, and demanded the return of Nazi-looted gold and German funds parked in Swiss banks. Eventually Switzerland resolved the dispute in return for a modest payment of 250 million Swiss francs — far less than initially demanded — thanks to the early Cold War and its firm alignment with the West through the Washington Agreement of 1946.

By 1950, Switzerland was among the first Western nations to recognize Communist China, seeing it as an economic giant in the making. It joined the European Free Trade Association (EFTA) in 1960 — a looser alternative to the EU — to maintain its policy of strategic independence. A decade later, it signed its first trade deal with China.

In the 1990s, it rejected both the European Economic Area (EEA) and EU membership, positioning itself as a hub between the EU, the United States, and rising Asian economies. As Swiss historian Sébastien Guex put it: “The Swiss banking and industrial elite has become masterful in exploiting contradictions among imperial powers to advance its own agenda.”

From Go-Between to Rival

After the fall of the Soviet Union in 1991, Switzerland lost its role as Washington’s quiet intermediary in places like Cuba (since 1961), Egypt (1967–74), Iran (1980–81), and Vietnam (from 1975 to the early 1990s). It evolved into a rival economic force, particularly in finance and select industrial sectors.

Under US pressure, Switzerland’s largest banks, UBS and Credit Suisse, became entangled in the scandal over dormant Holocaust-era assets. From 1995 to 1998, they narrowly avoided full-scale litigation by paying $1.25 billion (about $2.3 billion today) into a restitution fund for Holocaust survivors, forced laborers, and others harmed by Swiss institutions. This led to the establishment of the Bergier commission to investigate Switzerland’s economic ties with Nazi Germany.

In 2008, UBS was fined nearly $780 million for helping US clients evade taxes and was forced to hand over thousands of names. The fallout ultimately led Switzerland to dismantle its famed regime of banking secrecy. In 2010, under the Foreign Account Tax Compliance Act (FATCA), foreign banks were compelled to report American assets — a law Switzerland had no choice but to accept. Several Swiss banks have since been fined or made settlements to avoid criminal prosecution.

US criticism of Swiss pharmaceuticals dates to the 1970s, with industry giants like Roche, Ciba-Geigy, and Sandoz dominating global markets. In the 1980s, lobbying from Pfizer and Merck led to accusations that Switzerland was exploiting looser patent laws. By the 1990s, the United States used the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) to push for stricter intellectual property protections. Swiss firms were then accused of distorting competition and charging Americans exorbitant prices to fund their R&D. Trump’s tariff war is the culmination of decades of growing friction.

Swiss pharma is a formidable rival to American capitalism. With 5 to 7 percent of the global market, Switzerland ranks fifth among pharmaceutical exporters. It is home to two of Big Pharma’s most innovative firms: Roche and Novartis. Each employee in Switzerland generates hundreds of thousands of francs in value-added. Swiss firms hold near-monopolies on treatments for cancer, degenerative diseases, and rare conditions.

As Karl Marx noted in Capital, volume 3: “Capitalists form a veritable freemason society vis-à-vis the whole working class, while there is little love lost between them in competition among themselves.” In today’s globalized marketplace, increasingly fractured by post-2008 economic nationalism, the world’s monopolies are clashing again, backed by their respective states. The United States no longer enjoys its former “natural supremacy,” and its aggressive trend reflects this new uncertainty.

An Island in the Ocean

For Swiss exporters, the tariffs are a heavy blow. In 2024, 18.6 percent of all Swiss exports went to the US. Economic forecasts suggest these measures could slash Swiss GDP growth to as little as 0.3 percent by 2026. The sting is sharper still, as the UK and the EU secured better deals — though talks are ongoing.

Swiss political leaders are split on how to respond. Big Pharma is the flagship of the Swiss economy, and the pressure is intense. Thomas Borer, a former diplomat and lead negotiator in the Holocaust funds case, urged full capitulation in an August 3 interview with the conservative Neue Zürcher Zeitung. “We were just an island in the German ocean,” he famously told Le Soir in 1997. Today he suggests offering Trump a bouquet of concessions to safeguard Swiss corporate interests.

His proposal is to increase Swiss investments in the United States (five hundred firms already employ four hundred thousand people there), buy more American liquefied natural gas (LNG), purchase more US weapons, and lift tariffs and regulations protecting Swiss agriculture. He even suggests sending minister Guy Parmelin from the conservative Swiss People’s Party — “an old white man with a French accent,” in Borer’s words — to negotiate or, better yet, catch Trump on the golf course where he’s more agreeable. The message is clear: don’t challenge a superpower head-on.

Could Trump envision turning Switzerland into a US economic dependent — a fiscal paradise in the heart of Europe? Does he see it as a potential base for ski resorts (like Crans-Montana, already American-owned), a stone’s throw from Davos, and a short flight from his dream Mediterranean resorts — like Sazan Island in Albania, where his son-in-law Jared Kushner is investing $1.4 billion for an ultraluxury compound, or Gaza, which Trump recently proposed transforming into a “Middle Eastern Riviera”? After all, the CEO of Novartis is already American. A 2024 satirical sketch in the United States even floated such a scenario — perhaps not so far-fetched after all.

A 39 percent tariff would surely hit Swiss pharma profits, but these firms are resilient. Over the past five years, Roche has posted an average annual net profit of $13 billion (with 6.3 percent dividend growth), and Novartis $14 billion (with 16.6 percent dividend growth). They have deep reserves.

Moreover, those firms have planned ahead. In 2024, Slovenia, which has a population of two million, became Switzerland’s top destination for pharma exports, overtaking the United States. Swiss company Sandoz acquired Slovenian firm Lek in 2002 to specialize in biosimilars (low-cost biological drug alternatives). Switzerland has turned Slovenia into its pharma hub.

By conducting the final production phase there, companies can reexport drugs to the United States under EU tariffs — a clever workaround. Sandoz and Novartis are already expanding operations. Logistics giant Kuehne+Nagel recently opened a 38,000-square-meter pharmaceutical warehouse near Ljubljana airport. While legal hurdles remain, the strategy offers options, with a little creativity.

Priorities

Since 2000, the Swiss franc has gained 48 percent against the dollar and 66 percent against the euro. Exporters have offset this through productivity gains and tight wage and spending policies. Real wages in 2024 still lag behind 2021 levels. Net national debt is just 17.2 percent of GDP, and the 2024 budget deficit was a mere 0.1 percent.

Despite this, Swissmem, the employers’ association for the machinery industry, issued ten demands in response to Trump’s tariffs. They include freezing social and environmental spending, accelerating bilateral trade deals (especially Bilateral Agreements III with the EU), and scrapping foreign investment screening laws (“Lex China”).

If the Swiss government prioritized the needs of its people over corporate profits, it would reject Trump’s global billionaire agenda. Instead, it would forge new industrial and trade alliances with nations resisting US hegemony. It would launch massive public investment in social housing, public transit, environmental protection, research, and international solidarity. It would denounce the ongoing genocide in Gaza and send massive medical aid to the victims of Israel’s colonial assault.

Such actions would address essential social and ecological needs and restore a basic sense of justice. They could also help curb the franc’s strength, as Switzerland’s ultra-low debt is a major driver of currency appreciation in a protectionist world. The country clearly has the financial means. But only a broad-based social movement could force such a radical shift away from a policy shaped by the interests of a privileged few. Merely imagining this alternative is already a first step toward making it possible.