This Trump Tariff Could Increase America's Trade Deficit
Switzerland might respond to Trump’s double-digit “reciprocal” tariff by canceling its multibillion-dollar F-35 order.
President Donald Trump's trade war has fractured America's relationship with much of the world, including historic trading partners like Switzerland.
In July, Trump imposed 39 percent tariffs on Switzerland—more than double the 15 percent rate to which its European Union neighbors are subjected—marking a sharp departure from the American-Swiss trading relationship. The tariffs went into effect last week on August 7. The average tariff rate that the U.S. subjected Swiss imports to was 2.21 percent in 2022 (the most recent year for which data are available), according to the World Bank. Switzerland's average tariff rate on American goods was even lower: a mere 0.52 percent. In January 2024, Switzerland abolished all industrial tariffs, resulting in 99.3 percent of American goods entering the country tariff-free, according to Switzerland's State Secretariat for Economic Affairs.
Despite Switzerland's nearly completely laissez faire trading relationship with the U.S., Trump complained of a $41 billion deficit with Switzerland during an August 5 interview on CNBC's Squawk Box. (According to the Office of the U.S. Trade Representative, the American-Swiss goods deficit in 2024 was not quite that high: $38.3 billion.) However, this figure excludes trade of services between the two countries, which accounted for a trade surplus of $29.7 billion in favor of America. The total trade deficit, then, was approximately $8.6 billion, or 21 percent of Trump's inflated claim.
Trump has justified his tariffs against Switzerland on the American-Swiss trade deficit, but his policies have made this deficit worse since he took office in January. U.S. Census Bureau data show a nearly $48 billion goods deficit with Switzerland accumulated from January to June—390 percent greater than the January 2024–June 2024 deficit of $9.8 billion. (Trade in services data has not yet been published by the U.S. Trade Representative for 2025.)
By introducing volatility in global markets, Trump is partially responsible for widening the deficit in goods trade with Switzerland. The New York Times reports that "surging demand for gold in the United States as Mr. Trump threatened to upend the global trading order fueled a spike in Swiss gold imports," which are exempted from Trump's tariffs and account for two-thirds of recent Swiss exports to the United States. The next largest import is pharmaceuticals, which the Times explains "are temporarily excluded from U.S. import taxes while Mr. Trump considers imposing a sector-specific tariff."
Politico reports that Swiss lawmakers are considering canceling the country's order of 36 F-35 fighter jets, which would widen the goods deficit further. Switzerland entered the 6-billion-franc ($7.5 billion) deal in 2021, but was told by the U.S. in July that "additional costs to the original price tag will range between CHF650 million [$805 million] and CHF1.3 billion [$1.6 billion]" due to "higher material costs and inflation," according to swissinfo.ch. Fittingly enough, these higher material costs are partially attributable to Trump's tariffs, which he imposed on countries that export F-35 components to the U.S., like the U.K., Australia, the Netherlands, Canada, Italy, Denmark, and Norway.
Trump exacerbated the trade deficit with Switzerland by unintentionally encouraging Americans to hedge against economic instability with Swiss gold. Trump's 39 percent tariffs against Switzerland may very well increase the very deficit he seeks to reduce if Swiss lawmakers reduce or cancel their multibillion-dollar F-35 deal.