UBS Warns: Rising U.S. Tariffs Could Dampen Economic Growth Ahead

2 min readSep 1, 20257:51 AM

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The Swiss economy faced a notable slowdown in growth during the second quarter of 2025, with the Gross Domestic Product (GDP) nudging up just 0.1 percent quarter-on-quarter. According to the Chief Investment Office Global Wealth Management of UBS, this modest expansion, which appears to contrast significantly with the growth seen in the previous quarter, was largely influenced by a steep drop in exports, particularly in the pharmaceutical sector, where shipments fell after a robust performance earlier this year.

Consumption: The Unsung Hero

Despite worries about declining exports, Swiss private consumption has stood firm, contributing significantly to the economy’s resilience. In the second quarter, household consumption saw an increase of 0.3 percent, while government spending surged by 0.9 percent. This uptick has provided a cushion against the slowdown, demonstrating the vital role consumer spending plays in maintaining economic stability.

Forecasting Future Growth

Looking ahead, UBS economists have revised their full-year GDP growth forecast to approximately 1.3 percent, a small but encouraging increase from their earlier prediction of 1.0 percent. “While the ongoing tariff disputes with the U.S. will undoubtedly challenge foreign trade, we still expect consumption to buoy the overall economy,” they stated. For 2026, projections suggest a growth of around 0.9 percent, contingent on how tariff negotiations evolve.

“For 2026, projections suggest a growth of around 0.9 percent, contingent on how tariff negotiations evolve.”

The Tariff Tango: Implications on Employment and Trade

UBS posits that if the tariff rate remains at a daunting 39 percent, it could lead to a GDP decline as significant as 0.4 percentage points. Furthermore, it might put up to 0.4 percent of jobs at risk. However, analysts believe Switzerland’s proactive short-time work model may mitigate the adverse effects on the labor market and keep unemployment at bay.

Potential Shifts in Pharmaceutical Exports

As tariffs put pressure on Swiss trade, the pharmaceutical industry faces a challenging medium-term outlook. UBS experts anticipate that manufacturers may need to establish production facilities within the U.S. to bypass the high tariffs. “The Swiss pharmaceutical sector is likely to adapt by building sufficient capacity in the U.S. over time. While this strategy aims to sidestep tariff penalties, it threatens to diminish Switzerland’s trade surplus, ultimately weighing on economic growth,” they cautioned.

As Switzerland navigates the complex landscape shaped by U.S. tariffs and global trade dynamics, one thing is clear: the dance of diplomacy and economics will continue to lead the national narrative.

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Questions & Answers

What are the main factors contributing to the slowdown in Swiss economic growth?

The slowdown is primarily attributed to a significant decline in exports, particularly in the pharmaceutical sector, following earlier boosts due to pre-emptive stockpiling ahead of U.S. tariffs.

How has private consumption affected the Swiss economy?

Private consumption has been a key driver for economic stability, with households increasing spending by 0.3 percent. This consumption rise has helped cushion the impacts of falling exports, allowing for modest overall growth.

What impact could high U.S. tariffs have on jobs in Switzerland?

UBS estimates that high tariffs could place up to 0.4 percent of jobs at risk. However, Switzerland’s short-time work model may help alleviate the fallout on the labor market.

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