Switzerland Faces Trade Shock as US Slaps 39% Tariff Amid Global Realignment

Economic

Summary:

The United States has imposed a steep 39% tariff on Swiss imports one of the highest globally dealing a significant blow to Switzerland’s export-heavy economy...

A Harsh Turn: From 31% Threat to 39% Reality

In a move that stunned Swiss officials and markets alike, U.S. President Donald Trump announced a 39% tariff on Swiss goods through an executive order, surpassing the earlier threat of a 31% levy. The decision comes despite months of behind-the-scenes diplomacy and positive signals from U.S. officials. The Swiss franc slipped 0.2% against the U.S. dollar following the news, though it remains 8% higher than pre-April levels due to a surge in safe-haven demand.

Bern’s negotiators were reportedly blindsided by the sudden escalation. While Switzerland continues to seek a resolution, officials admit they may have had less to offer than other nations. Their proposals such as concessions on citrus and nuts or streamlined U.S. medical device approvals did not match the breadth of trade-offs accepted by the EU, Japan, and South Korea, each of which secured a lower 15% tariff under separate deals.

Sectoral Impacts: Watches, Chocolate, and Pharma in the Crosshairs

Swiss exports are now at risk across multiple high-value sectors. Chocolatiers like Lindt and watchmakers such as Rolex and Swatch face weakened price competitiveness in the U.S., the world’s largest luxury consumer market. More critically, pharmaceutical giants Novartis and Roche, which account for nearly half of Swiss exports to the U.S., may face a double hit from both tariffs and political pressure on drug pricing.

President Trump has simultaneously launched a campaign demanding that major drugmakers charge the U.S. no more than what they charge other countries, sending letters to 17 major pharmaceutical firms. This pressure, combined with the new tariff regime, could lead to reduced revenue, job losses, and long-term R&D risks for Switzerland’s life sciences sector.

Swiss industrial groups are alarmed. Swissmechanic called the 39% rate “dangerous,” warning it could cement structural disadvantages, while Swissmem CEO Stefan Brupbacher called the move “irrational and arbitrary,” with the potential to endanger tens of thousands of jobs in high-tech manufacturing.

Political Calculus and Economic Consequences

Switzerland’s vulnerability stems in part from its limited bargaining leverage. With agriculture politically sensitive and representing less than 1% of GDP, Swiss policymakers faced strong domestic resistance to dismantling high-tariff agricultural protections a key sticking point in negotiations with the U.S.

The result is a deeply punitive tariff that places Switzerland outside the circle of nations that reached mutual understanding with Washington. The decision also comes at a moment of broader economic fragility: Trump’s tariff campaign has distorted currency movements, contributing to the Swiss franc’s rise. In response, the Swiss National Bank was forced to cut rates back to zero after earlier signaling a halt to easing, attempting to mitigate export losses caused by the currency shock.

A Narrow Window for a Climbdown

The new tariffs are set to take effect on August 7, giving Switzerland just one week to restart talks or secure temporary relief. Bloomberg Economics analysts note this window may still offer room for sector-specific or reciprocal rate negotiations, not only for Switzerland but also for similarly affected economies like India and Taiwan.

Still, unless Bern can offer more substantive concessions quickly, Swiss exporters face the reality of operating under some of the world’s harshest U.S. tariff conditions. The long-term risks include reduced foreign investment, diminished export revenues, and potential job losses in sectors critical to the Swiss economy.

The move underscores a broader trend: the reconfiguration of global trade under Trump’s second-term tariff blitz, with manufacturing reshoring, geopolitical alignment, and trade imbalances now taking precedence over long-standing diplomatic ties even with countries like Switzerland.

Source: Reuters

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Winkelmann

Economic

Forex

EURUSD forecast

On the H4 chart of EURUSD, the market continues to develop a compact consolidation range around 1.1420. Today, 1 August 2025, this range is expected to expand down to 1.1387 and up to 1.1421. A correction to 1.1487 is also possible. Afterwards, a downward wave to 1.1185 is likely. This is a local target.Technically, the Elliott wave structure and the matrix of the downward wave with a pivot point at 1.1487 confirm this scenario. This level is seen as key in the EURUSD wave structure. The market is currently forming a downward wave to the lower boundary of the price Envelope at 1.1185. Once this level is reached, a rebound to the central line at 1.1487 is possible.

Technical indicators for today’s EURUSD forecast suggest a downward wave towards 1.1185.

USDJPY forecast

On the H4 chart of USDJPY, the market formed a consolidation range around 148.62 and broke out upwards. Today, 1 August 2025, a growth leg towards 151.45 is possible. Later, the price is expected to correct back to 148.62 (testing from above), followed by a rise to 153.40.Technically, the Elliott wave structure and the matrix of the growth wave with a rotation centre at 148.62 confirm this scenario. This level is considered key in this wave. The market completed a growth wave to the upper boundary of the Price Envelope at 151.45. A decline to the central line at 148.62 is not excluded, followed by a move up to the upper boundary at 153.40.

Technical indicators for today’s USDJPY forecast suggest a rise to 151.45.

GBPUSD forecast

On the H4 chart of GBPUSD, the market continues a downward wave towards 1.3155 as a local target. Today, 1 August 2025, this target level may be reached. Afterwards, a correction to 1.3370 (testing from below) is likely, followed by a decline to 1.2950.Technically, the Elliott wave structure and the matrix of the downward wave with a pivot point at 1.3370 confirm this scenario. This level remains key in the wave structure. The market is currently forming a downward wave to the lower boundary of the price Envelope at 1.3155. Later, a correction to the central line at 1.3370 is possible.

Technical indicators for today’s GBPUSD forecast suggest a decline towards 1.3152.

AUDUSD forecast

On the H4 chart of AUDUSD, the market continues to develop a consolidation range around 0.6444. Today, 1 August 2025, an upward breakout would open the way for a correction to 0.6555. If it breaks downwards, the downward wave may continue to 0.6408 as the first target.Technically, the Elliott wave structure and the matrix of the AUDUSD downward wave with a pivot point at 0.6515 confirm this scenario. This level is viewed as key in this wave structure. The market is currently forming a downward wave to the lower boundary of the price Envelope at 0.6408. Afterwards, a rise to the central line at 0.6515 is possible, followed by a continued decline to the lower boundary at 0.6400.

Technical indicators for today’s AUDUSD forecast suggest a decline to 0.6408.

USDCAD forecast

On the H4 chart of USDCAD, the market formed a consolidation range around 1.3747 and broke out upwards. Today, 1 August 2025, a continued upward wave towards 1.3920 is expected. Later, a pullback to 1.3750 (testing from above) is possible.Technically, the Elliott wave structure and the matrix of the growth wave with a pivot point at 1.3750 confirm this scenario. This level is considered key in the wave structure of USDCAD. The market formed a consolidation range around the central line of the price Envelope at 1.3750 and broke upwards. Today, the scenario of growth towards the upper boundary at 1.3920 remains relevant.

Technical indicators for today’s USDCAD forecast suggest a move up to 1.3920.

XAUUSD forecast

On the H4 chart of XAUUSD, the market is forming a consolidation range around 3,300. The range currently extends down to 3,268 and up to 3,314. Today, 1 August 2025, a decline to 3,247 is possible. This is a local target.Technically, the Elliott wave structure and the matrix of the downward wave with a pivot point at 3,345 confirm this scenario. This level is viewed as key in the wave structure of XAUUSD. The market is executing a downward wave to the lower boundary of the price Envelope at 3,247. Afterwards, a rise to the central line at 3,345 is possible, followed by a decline to the lower boundary at 3,150.

Technical indicators for today’s XAUUSD forecast point to a downward wave towards 3,247.

Brent forecast

On the H4 chart of Brent crude, the market is forming a consolidation range around 71.75. Today, 1 August 2025, a downward breakout may lead to a correction to 70.00. If the price breaks upwards, the wave may continue to 73.33 with the potential to extend the trend to 76.00 as a local target.Technically, the Elliott wave structure and the matrix of the growth wave with a pivot point at 71.80 confirm this scenario. This level remains key in the current wave of Brent. The market is forming a consolidation range around the central line of the price Envelope at 71.80. A short-term decline to 70.00 is not excluded, followed by a rise to the upper boundary at 73.33. Later, a pullback to the central line at 70.80 is possible.

Technical indicators for today’s Brent forecast suggest the continuation of the growth wave towards 73.33 and 76.00.

Source: RoboForex

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Gerik

Economic

PMI Nears Expansion Territory Amid Stabilizing Trends

The latest HCOB Eurozone Manufacturing PMI, compiled by S&P Global, climbed to 49.8 in July from 49.5 in June. While still technically contracting, this reading is the closest the bloc has come to returning to growth in three years. The output index remained in expansion territory at 50.6, though it eased slightly from June’s 50.8, indicating continued albeit slower growth in production.

This stabilization appears to reflect improved confidence, partially thanks to the newly established trade framework between the U.S. and the EU, which introduced a flat 15% tariff on most EU goods. While tariffs typically strain exporters, the agreement brings predictability, which may ease planning and supply chain concerns.

Country-Level Divergence Reflects Uneven Recovery

At the country level, manufacturing performance remained mixed. Germany's PMI rose to a 35-month high of 49.1 but continued to signal contraction. Ireland remained the bloc's top performer at 53.2, despite slipping from June, while the Netherlands and Spain each posted readings of 51.9, marking 14-month and seven-month highs, respectively. Greece maintained modest growth at 51.7. On the downside, France and Austria lagged with readings of 48.2.

This divergence suggests that while the broader euro zone is edging toward stabilization, national-level recoveries depend on domestic conditions and sector-specific dynamics particularly in export-driven markets affected by new tariffs.

Demand Weakness Lingers but Price Pressures Ease

Despite signs of stabilization, demand remains soft. New orders dipped in July, with export sales weakening after briefly stabilizing in June. However, price dynamics continue to support the ECB’s policy pause: input costs held steady after three months of declines, and output prices showed minimal change, reinforcing the view that inflationary pressures in manufacturing remain subdued.

This pricing environment is likely to provide cover for the European Central Bank to maintain its cautious monetary stance after it held rates steady last week, signaling that growth concerns may now be competing with inflation as the dominant policy focus.

Gradual Recovery with Cautious Optimism

Manufacturers remain cautiously optimistic. While confidence in future output moderated slightly from June’s 40-month high, it remains above the long-term average, indicating a steady, if tentative, recovery path. The combination of stable prices, soft demand, and reduced trade uncertainty may support a more balanced economic environment in the second half of 2025.

Still, the pace of recovery may hinge on whether domestic demand rebounds and whether external risks such as global tariff disputes and slowing U.S. consumption continue to weigh on European exports. The coming months will be crucial for determining if euro zone manufacturing can sustain this recovery and cross the growth threshold.

Source: Reuters

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Daniel Carter

Economic

Malaysian pharmaceutical products and semiconductors will be exempt from US tariffs, the country's trade minister Tengku Datuk Seri Zafrul Abdul Aziz said on Friday.

"At this time, exports of semiconductor and pharmaceutical (products) remain at 0% (tariff rate)," he said at a press briefing after the United States imposed a tariff of 19% on Malaysia's exports.

He said the levy on Malaysian goods would be effective from August 8.

Zafrul also said that there had been no agreement with the United States or other countries on the exclusive supply of rare earths.

"In fact, no such request has been made by the US," he said.

Gaining access to rare earth metals has been a crucial part of US trade negotiations, with rival China currently in control of 90% of global processing capacity. Critical minerals were also under discussion during US negotiations with Indonesia.

Zafrul said Malaysia and the United States would release a joint statement on tariffs at the weekend.

The trade ministry said in a statement earlier on Friday that the tariff outcome came after sustained engagement by both countries and did not cross any of Malaysia's "red lines" or compromise its sovereign rights.

Source: Theedgemarkets

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Michelle

Economic

Forex

Euro zone inflation was unchanged at a higher-than-expected 2% in July, flash data from statistics agency Eurostat showed Friday.

Economists polled by Reuters had expected the figure to hit 1.9%, after a 2% reading in June.

The inflation figures follow on the footsteps of indications earlier this week that showed the euro zone economy expanded by a better-than-expected 0.1% in the second quarter, which was nevertheless sharply down on the 0.6% growth of the three months to the end of March.

Analysts interpreted the data as Europe's economy so far showing resilience in the face of U.S. President Donald Trump's tariff policies. The European Union and Washington recently inked a trade agreement which includes a 15% baseline levy for EU goods bound for the U.S. Sectoral tariffs and temporarily reduced so-called reciprocal duties have already been in play.

Duties are widely expected to weigh on economic growth, including in the euro zone, and affect prices of goods for U.S. consumers. Their impact on inflation in Europe remains uncertain.

Source: CNBC

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Gerik

Economic

Tariff Shock Bites into Exporters’ Margins

In its full quarterly outlook, the Bank of Japan highlighted a critical concern: Japanese exporters, especially automakers, are absorbing U.S. tariffs rather than passing them onto American consumers. This price cushioning strategy, meant to maintain sales volumes, has already driven export prices down by around 20% since April, eroding profitability. The BOJ notes that this pressure may deepen as trade volumes normalize, exposing the true extent of the damage.

While the U.S.-Japan trade deal inked last month reduced auto tariffs from 25% to 15% and spared other goods from new levies, the relief is delayed and partial. Automakers still face the challenge of protecting market share in the U.S. without compromising margins. With Japan’s auto sector representing over a quarter of its U.S. exports, the stakes are high.

Capex Caution Emerges Despite Initial Stability

Although corporate capital expenditure plans remain largely intact for now having been set at the start of the fiscal year in April the BOJ warns that history shows such shocks often trigger capex downgrades later in the year. The central bank flagged that uncertainty surrounding global trade policy, particularly the volatile trajectory of U.S. tariffs, could discourage long-term investment decisions as 2025 progresses.

Importantly, the BOJ cautions that falling profits could also temper corporate appetite for wage hikes, which are crucial for achieving sustained domestic inflation and supporting household demand two core pillars of Japan’s economic recovery plan.

Growth Forecasts and Lagging Confidence

In its macroeconomic projections, the BOJ still expects GDP growth of 0.6% in 2025, with slight acceleration to 0.7% in 2026 and 1.0% in 2027. However, these forecasts hinge on the assumption that companies will not drastically scale back investment or payroll commitments. With the specter of tariffs looming large, this assumption may prove optimistic.

The BOJ also underscored that the trade front-loading where firms expedite exports to beat tariff deadlines has temporarily inflated trade volumes. Once this effect fades, a clearer picture of actual demand and export conditions will emerge, potentially revealing deeper vulnerabilities.

While the BOJ acknowledges the recent U.S.-Japan trade deal as a mitigating factor, its report signals deepening concerns over the medium-term outlook. With profitability under pressure and capital investment at risk, Japan's export-led recovery could lose momentum if tariff uncertainties are not resolved. The central bank’s cautious tone suggests that while rate hikes remain on the table, any aggressive tightening would be weighed carefully against trade-related headwinds and weakening corporate confidence.

Source: Reuters

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Gerik

Economic

European Airline Stocks Climb Despite Regulatory Headwinds

Over the past six months, European airline stocks have defied geopolitical and macroeconomic uncertainty, with carriers like Air France-KLM, Lufthansa, and IAG reporting strong second-quarter results. Air France-KLM leads the gains, benefiting from its elevated luxury image and successful premium seat sales, particularly on transatlantic routes.

These performances contrast with persistent complaints from European airline CEOs regarding environmental levies and airport taxes. Nonetheless, the discipline in cost control and strategic positioning have yielded positive investor sentiment, helping European carriers outperform in the equity markets.

U.S. Airlines Weighed Down by Weak Consumer Confidence

By contrast, U.S. airlines such as Delta, United, and American have seen share prices decline through much of 2025, reflecting a slowdown in discretionary travel spending. The uncertainty created by President Trump’s aggressive tariff policies, including sweeping new levies on 68 countries and the EU, has dented both consumer and corporate confidence.

While the recent tax-and-spending bill provided some clarity and sparked a short-term rebound in airline stocks, the overall sentiment remains fragile. Earnings forecasts for 2025 have been revised down, and analysts remain cautious about the near-term outlook.

Transatlantic Demand Softens but Doesn’t Collapse

Analysts note that fears of a collapse in transatlantic demand have not materialized. While demand has softened, especially on North Atlantic routes, it remains relatively stable, with Americans continuing to book travel to Europe, often opting for European carriers. This divergence has given European airlines a relative edge in the global aviation market.

Goodbody analyst Dudley Shanley noted that demand "was a little weaker but it has not collapsed as had been feared by investors," suggesting that pessimism may have been overdone. This sentiment has helped stabilize share prices in both regions, though the gap remains wide.

Tariff Fallout May Be Temporary but Risks Persist

Booking Holdings’ CFO confirmed that U.S. travel demand still lags behind Europe and Asia. This reflects not only economic conditions but also differences in regulatory and consumer behavior across regions. Analysts like Conor Cunningham of Melius Research remain cautiously optimistic, indicating that if corporate travel and consumer confidence improve, the current dip could be seen as a temporary tariff-induced pause.

Yet the prospect of more trade frictions remains a looming risk. The uncertainty tied to retaliatory measures and geopolitical volatility continues to cast a shadow over U.S. carriers, making sustained recovery more difficult.

In 2025, European airlines have navigated macroeconomic headwinds more effectively than their U.S. peers, leveraging strong transatlantic demand and tighter cost structures. Meanwhile, U.S. airlines are caught between inflation, regulatory ambiguity, and trade war fallout. Whether the current performance gap narrows depends largely on how quickly U.S. travel demand rebounds and how global trade tensions evolve.