Switzerland, Spurned By the US, Turns To the EU 

When the Swiss recently learned they would be hit with 39 percent tariffs on their exports to the United States, many thought it was fake news.  

That couldn’t be right, some said. After all, they had made a deal. And they would certainly be given special consideration from the US, whom they see as their “sister republic.”  

But when the reality set in, many government officials and business leaders flew into a panic because they knew that such a rate – the highest tariffs placed on any developed country – would hit the export-led country’s economy hard, costing jobs and growth.  

“(Switzerland is) under attack by the US government,” said Stefan Brupbacher, head of Swissmem, one of the country’s largest industry groups. Swiss newspapers such as Blick described the turn of events in calamitous terms, calling it the country’s biggest defeat since it lost the Battle of Marignano to the French in 1515. 

Now, as a result, some in Switzerland, which has maintained a policy of staunch neutrality and fervent independence for centuries – even through two world wars – are considering the once-unthinkable: Moving closer to the European Union.

“We’re a small country, we’re extremely vulnerable and we’ve just been humiliated,” Sherban Tautu, founder of Geneva-based asset manager Ten Edges Capital, told the Wall Street Journal. “The cost of being independent suddenly becomes cruelly obvious to people.” 

The Swiss reaction is very much in line with those of other countries in the wake of the tariff announcement in April by US President Donald Trump: Nations from Canada to Brazil have announced emergency measures to help their battered exporters, have made trade agreements with other countries, or blocs, to insulate and diversify their economies, and occasionally, have fought back with heightened tariffs of their own.  

Still, analysts say Switzerland’s turn toward the EU isn’t surprising for another reason: The Swiss find themselves vulnerable for the first time in centuries. 

“Trump’s tariff shock has provoked a major identity crisis in a country that has grown rich on exports, and done so in splendid isolation from world politics,” wrote Joseph de Weck of the Foreign Policy Research Institute in the Guardian, who says the greatest aspect of the shock of the tariffs is psychological. “In a multicultural, federal country with four official languages, the grand unifying narrative of Swiss exceptionalism is in tatters.”

Part of the issue is that the Swiss felt blindsided, said observers: Swiss officials had been told they would be at the top of the list for a deal and would likely only face 10 percent tariffs instead of the 31 percent unveiled on Liberation Day. Meanwhile, that latter rate was bumped up eight points.  

That’s because the country sold $38 billion more in goods and services to the US than it bought last year, and that number increased to $48 billion during the first six months of this year. “President Trump sees Switzerland as doing too little to address its trade deficit with the US,” suggested the New York Times.  

Much of the imbalance can be traced to gold refining, a sector seeing a surge in demand for the metal in the United States because of the uncertainty the tariff regime has unleashed on global markets.  

Meanwhile, for years, the Swiss have been in a ‘friends with benefits’ relationship with the EU, cooperating economically and in other ways but always maintaining a strict neutrality and distance.  

Recently, the Swiss cabinet approved its biggest trade policy overhaul in years with the bloc.  

The package of agreements with the EU covers not only trade but also transport, security, and education. They are designed to ensure “better and more predictable relations” with its surrounding neighbors, according to the Swiss government. 

It may not be bloc membership but it is a move closer to the bloc than many Swiss would like, though public opinion is shifting, say observers.  

“What is certain is that the Swiss left is benefiting from the tariff shock as it is traditionally more EU-friendly,” noted the Swiss Broadcasting Corporation. “But even those who have so far been less willing to position themselves are now in favor of closer ties with the EU, especially from business and the centrist parties.” 

Still, some Swiss have expressed alarm. “The deal amounts, they think, to passive membership of the EU,” wrote the Economist. “When the EU adopts laws that affect areas covered by the agreement, Switzerland would have to incorporate them into its legislation.”  

That won’t go over well in a country where direct democracy is taken to its purest form: Almost all laws, treaties, and other measures are made by referendum, including the new deal with the EU, analysts say.  

When it comes to the US, the Swiss are considering fighting back.  

Switzerland reduced its own tariffs to zero for US exports and promised billions in investment in the US, yet got no relief from US tariffs in return. Now, it is considering levying reciprocal tariffs, withdrawing the investment offer, and also the nuclear option: Swiss lawmakers are threatening to cancel an order for 36 F-35 jets from the US plane maker Lockheed Martin. 

These measures are being considered because there isn’t anything else left to offer the US. For example, it isn’t likely that the small, wealthy Alpine country can make up the trade deficit by buying more US products.  

“Balancing the deficit looks impossible,” the BBC wrote. “The population of Switzerland is just 9 million, and, bluntly, many of them don’t want to buy US products. The gas guzzling cars are too big for alpine roads, US cheese and chocolate… well, let’s just say they’re not really to Swiss taste.”