A New Swiss Battleground

August 1 is Switzerland’s equivalent of the Fourth of July. Americans commemorate freeing themselves from British rule. The Swiss celebrate Uri, Schwyz, and Unterwalden, the three original Swiss cantons, fighting off conquest by the Habsburgs.

This year, August 1 marked the day Trump informed Switzerland that he would impose a 39% tariff on Swiss exports to the US within a week. On the day that the country celebrates its war against the feudal rule of the Habsburgs, it is faced with another arbitrary decision by another authoritarian ruler.

On April 2, Trump threatened countries all over the world with irrational and destructive tariffs, and their governments began to haggle. Switzerland’s president, ministers, and diplomats have been negotiating as hard as the EU’s to have April 2’s 31% import duties lowered to something that wouldn’t damage the economy. The EU, Japan, and South Korea managed to get their tariffs reduced to 15%, still a significant burden on their economies, but probably not crippling. By contrast, Switzerland’s tariffs were raised from 31% to 39%. This puts the country in the same category as Iraq.

Why?

No explanation is forthcoming from Washington. Trump imposed 50% tariffs on Brazil because it put Jair Bolsonaro on trial for attempting a coup against the elected government of President Lula da Silva. Who knows what “crime” the president of the United States believes Switzerland has committed? Perhaps its only crime is to produce goods that Americans want. Eighteen percent of Swiss exports go to the US. These goods are worth $63.4 billion, while the US goods imported by the Swiss are worth only $25 billion. “It’s as if President Trump thinks we’re stealing the difference from him,” Swiss President Karin Keller-Sutter said yesterday about this trade imbalance.

The US negotiators who dealt with the Swiss trade delegation during the past four months understood that, while Switzerland may not import the equivalent value of goods from the US, it does import a quantity of US services that almost makes up the difference. In addition, Swiss companies have a long history of investing in the American economy; Switzerland is the sixth largest foreign investor in the US.

With his 39% tariffs, Trump’s response to these facts appears to be, “So what?”

Switzerland is a little larger than the state of Maryland, with under ten million people and no natural resources. There is, at least, abundant water for generating energy, although climate change is depleting that resource. What Switzerland does have to offer is a supply of highly educated, hard-working people who can provide financial services to the world and produce specialized goods, among them watches, complex machine parts, pharmaceuticals, and precision instruments that are used in medicine, manufacturing, and scientific research.

Although Switzerland has some well-known multinational companies, like Nestlé and Novartis, it also has many small- and medium-sized companies that produce a few, highly specialized high-tech products for the US market. Companies like these cannot weather an imposed price increase of 39%; they will be priced out of the market and go out of business. Since yesterday’s shocking announcement, there is already talk of thousands of jobs being threatened during the next few months. The Swiss economy will be deeply affected by Trump’s arbitrary decision.

And how will the United States economy profit? Perhaps in ten or twenty years, the United States will be producing all the high-tech instruments and equipment that, beginning on August 7, it will no longer be able to afford to buy from Switzerland. In the short and medium term, however, US firms will suffer a severe lack of tools and parts. Not to mention that attacks on US educational institutions by the federal government will not help Americans acquire the skills they need to design and reproduce the Swiss goods that Trump is forcing them to give up.

“When a superpower elevates chaos to a political principle, it doesn’t leave a tiny country like Switzerland much room to maneuver,” writes Swiss journalist Mario Stäuble. Trump is leaving the majority of his fellow Americans without much of a chance to respond to his dictatorial decisions, either.

The picture that begins this post is of an August 1 parade in Grindelwald. The men in the foreground are ringing heavy cowbells as they walk. Photo by David Birri.