Switzerland’s economy contracted sharply in the third quarter, as exports were hit by a steep US tariff that was revised under a new deal on Friday.
GDP fell by 0.5 per cent between July and September compared with the previous three months, the Swiss statistical office said on Monday, a bigger drop than the 0.1 per cent expected by analysts polled by Bloomberg. The Swiss economy eked out 0.1 per cent growth in the second quarter.
US President Donald Trump hit Switzerland in August with an unexpected 39 per cent tariff, which was finally softened in the deal struck on Friday.
GDP in Switzerland “fared a lot worse” than the Eurozone in the third quarter, noted Melanie Debono, an analyst at Pantheon Macroeconomics, pointing to the 0.2 per cent growth in the 20-country currency bloc over the same period.
The drop in Swiss GDP in the third quarter was driven by a “sharp decline” in the chemical and pharmaceutical sectors that contributed to a contraction across industry overall, the statistical office said. While the services sector continued to expand, it grew “at a below-average rate”.
The drop was the second contraction in Swiss GDP since the Covid-19 pandemic.
While the release did not give more detail, Debono suspects that the main driver of the decline was trade, as 40 per cent of all Swiss goods exports to the US were subject to what she called the “whopping” 39 per cent tariff.
Friday’s tariff deal could boost annual GDP by up to 0.5 percentage points, Zurich-based think-tank KOF said on Friday, increasing growth in 2026 to “well above 1 per cent”. Previously it was forecast at 0.9 per cent.
Switzerland’s central bank in June lowered the country’s benchmark interest rate to zero and has held it steady at that level so far.
Friday’s deal to lower the US tariff rate to 15 per cent was “promising” but so far only based on a memorandum of understanding that was not legally binding, lacked key detail and still “could all fall through”, Debono warned.
Separately, the European Commission on Monday downgraded its forecast for Eurozone growth next year as US trade tariffs start to bite.
The commission is now expecting the currency bloc to grow by 1.2 per cent next year, down from the 1.4 per cent it had predicted in May.
It revised up its expectations for GDP growth this year from 0.9 per cent to 1.3 per cent, but mainly because the bloc’s exporters accelerated shipments to get ahead of higher US tariffs.
The EU and US agreed a trade deal in August that imposed 15 per cent duties on most European goods.
“Export growth in the remainder of the year is set to slow down significantly,” the commission wrote on Monday, adding that “looking ahead to 2026, the growth of the EU’s export market is expected to slow down due to high global tariffs”.
Inflation in the Eurozone is expected to hover around the European Central Bank’s medium-term target of 2 per cent for the next two years.
