Swiss economy accelerates as exporters race to beat U.S. tariffs

Key Points

• In Q1 2025 Swiss GDP rose by 0.8% quarter-on-quarter and year-on-year, marking its fastest expansion since early 2023.
• Exports of watches, chemicals, pharmaceuticals and precision instruments to the US surged as companies front-loaded shipments ahead of planned 31% (later cut to 10%) US tariffs.
• Heightened policy uncertainty and a stronger Swiss franc have led to canceled or frozen equipment orders, with the PMI plunging to 42.1 in May, signaling a contraction.
• Analysts warn that the export boom may quickly fade as tariffs take effect and investment stalls, potentially dampening future GDP growth and labor market conditions.

The first quarter of 2025 saw the Swiss economy grow at its fastest rate in two years, thanks to a spike in exports to the US as companies scrambled to avoid new U.S. tariffs.

Swiss GDP doubled its long-term average quarterly growth rate, up 0.8% from the previous quarter, according to a report released Monday by the State Secretariat for Economic Affairs. It was the quickest pace since the beginning of 2023. Additionally, the economy grew by 0.8% over the same time last year. Prior to the Trump administration’s tariff increase, Swiss businesses dramatically increased their shipments of watches, chemicals, pharmaceuticals, and precision instruments to the United States. “In particular, exports to the U.S. rose sharply, pointing to possible front-loading in connection with U.S. trade policy,” the State Secretariat for Economic Affairs said.

Swiss economy accelerates as exporters race to beat U.S. tariffs

Washington’s unexpected announcement in April of 31% tariffs on Swiss goods sparked the export boom. The initial action surprised Swiss manufacturers, even though U.S. officials have since reduced the figure to 10%. Switzerland’s biggest trading partner is the United States, and in order to prevent long-term harm, political leaders in Bern are currently working to find a permanent solution.

Although the increased activity has helped exporters in the short term, industry leaders caution that more serious issues are starting to surface. According to small and medium-sized engineering firms, demand has already decreased due to policy uncertainty. Swissmechanic, the trade group that represents companies in the mechanical engineering sector, claims that foreign buyers have begun to reduce their purchases of equipment.

“Everybody is in wait-and-see mode, and that means no orders,” said Nicola Tettamanti, President of Swissmechanic. “Business uncertainty is as high as it was during the COVID pandemic, and we will see the effect of this on GDP and the labour market in the next few months.”

Uncertainty leads to potential slowdown

Due to clients delaying investment decisions, Tettamanti observed that numerous orders for machinery and equipment have been canceled or frozen. The pressure has been exacerbated by the sharp increase in the value of the Swiss franc, which has reduced the competitiveness of exports and put further strain on manufacturers.

Early indicators are already indicating that slowdown. In May, the Swiss Purchasing Managers’ Index (PMI) fell to 42.1, its lowest level since May 2023 and a decrease of 3.7 points from the previous month. The index is still far below the 50-point mark, which denotes an expanding economy.

Despite the strong first-quarter performance, analysts caution that front-loaded export growth may fade quickly as tariffs begin to bite and investment stalls. With sentiment deteriorating across the manufacturing sector, observers expect weaker GDP numbers and rising labor market pressures in the months ahead—unless trade conditions stabilize.

Featured Image Credit: Christian Wasserfallen; Pexels: Thank You!

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