More KOF, customs disadvantage only slightly slows down the Swiss economy (cross-border guide)

Context

According to an assessment by the Institute for Economic Research (KOF) of the Federal Polytechnic University of Zurich, higher US customs duties than those in the EU should only put a minimal brake on the Swiss economy. The estimate was made possible thanks to the analysis of advanced economic models and the simulation of several assumptions of commercial relaunch between Switzerland and the United States.

The institute considered the potential impact of US customs duties on Swiss exports of goods and services, as well as the country's employment and GDP. According to estimates, the increase in US customs duties could lead to a 2-3% drop in Swiss exports by 2024, while employment could suffer a slight drop of 1.5%.

However, the KOF stresses that the impact of US customs duty increases on the Swiss economy could be mitigated by several factors, including:

• The diversification of Swiss exports, covering a wide range of economic sectors, including chemistry, electronics and biotechnology.
• Strong growth in exports of goods and services to other markets, such as the EU and Asia.
• The ability of Swiss companies to adapt quickly to business changes and to diversify their activities.

In addition, the KOF stresses that the impact of US customs duty increases on the Swiss economy could be further mitigated by several measures

Operational details

For individual firms, however, the disadvantage could prove quite significant, Zurich-based economic analysts say in a statement. With reduced margins, additional duties could have a significant impact on prices, market shares or headquarters decisions, particularly for export-oriented companies that are in direct competition with EU suppliers.

The organisation KOF (Konjunkturforschungsstelle, or the Conjuncture Research Foundation) has provided interesting data on the impact of the EU-UK agreement on the Swiss economy. According to KOF analysts, the agreement could have a positive impact on the GDP (Gross Domestic Product) of our country, but only about 0.1% in 2023 and 0.2% in 2024. This means that the Swiss economy will not be particularly affected by the agreement, but this does not mean that there are no risks for individual companies.

In particular, KOF analysts highlighted that companies that are in direct competition with EU suppliers could be more affected by the tariff increases. For example, textile companies importing raw materials from the EU could experience a cost increase of around 10-15% due to tariff increases. This could negatively affect their competitiveness and could lead to operational headquarters decisions, such as the

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Key points

According to KOF experts, the US tariffs for the pharmaceutical industry will determine the further economic trend. As exports of this class represent a substantial share of Swiss exports, the economic performance will depend to a large extent on which companies and products will benefit from derogations or on the possible achievement of more favourable conditions during further negotiations.

The pharmaceutical industry is one of the main sources of income for the Swiss economy, with companies such as Roche and Novartis accounting for a significant share of the country's exports. According to KOF data, Swiss drug exports amounted to CHF 12.3 billion in 2022, with Germany, France and the United States as the main recipients.

However, the introduction of US tariffs could have a significant impact on the production and export of Swiss medicines. According to KOF calculations, if 10% of Swiss drug exports were to be subject to tariffs, this could result in a loss of income for companies in the sector of around CHF 1.2 billion.

"The situation is complex and will depend on how the duties and waivers will be handled," explains a KOF expert. "If Swiss companies manage to get waivers or negotiate more favourable terms, the impact of the tariffs could be limited. Otherwise, the economic trend could

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Source: swissinfo.ch