The cards in world trade are being reshuffled

US customs policy is upsetting many countries and continues to dominate the headlines. Even though it is tedious and nerve-wracking, the economy seems to be coming to terms with the customs ruling. Meanwhile, countries are working on new trade agreements to redirect trade flows to other markets.

Protectionist tendencies began to emerge during the coronavirus pandemic, bringing an abrupt end to years of booming globalisation. 2 April 2025 marked another drastic turnaround in world trade. On what he proclaimed Liberation Day, US President Donald Trump announced the reintroduction of draconian basic and punitive tariffs on imports with the aim of strengthening continental industry. Previously, tariff barriers had been dismantled globally over decades. Most recently, for example, Switzerland had abolished tariffs on industrial products at the beginning of 2024.

The verdict from the US did not come as a surprise. Trump was essentially fulfilling a promise he had made to his voters during his election campaign. Nevertheless, stock markets around the world reacted immediately with massive losses. However, the shock paralysis among investors dissipated after just a few days. The sharp drop in prices was soon offset, and the stock markets continued their upward trend unabated.

Switzerland, as the sixth largest foreign investor in the United States – with investments in 50 states – initially believed itself to be on the safe side, especially since Trump also positively highlighted our country's steadfastness against joining the EU. This made the scale of the ‘tariff hammer’ that the US government then applied on our national holiday all the more surprising. No one had anticipated the mathematical formula it used to calculate the tariffs.

However, the expected reaction from stock market participants was largely absent. The economy and thus the stock market seemed to come to terms with it – out of necessity. This may also be because export-oriented companies find themselves in a state of permanent crisis following the coronavirus pandemic, followed by the outbreak of the war in Ukraine, the energy shortage and the Middle East conflict, where even the high import tariff of 39 per cent had little effect on them. The hope that the economic situation would finally stabilise was simply postponed for another year.

It was obvious and understandable to all parties involved that the companies would pass on the tariffs imposed on them to importers in the United States. The volatility of US customs policy is proving to be much more challenging and administratively burdensome for the companies affected. The constant back and forth in tightening and loosening the tariff screw on demand makes exports and investments in the United States unpredictable and is currently encouraging caution.

Large Swiss industrial companies that already manufacture in the US are there because it is an important sales market for them and there is already a corresponding demand for their products. Accordingly, they are not making their expansion plans dependent on US customs policy. They are only affected by the additional tariffs where they act as importers, for example in the case of raw materials such as steel or aluminium, which are subject to high import tariffs of 50 per cent, but which they also pass on. The development of the dollar and the continuing strength of the Swiss franc are proving to be factors of uncertainty for them.

The situation is more dire for smaller companies that are heavily dependent on US business and do not have the resources or opportunities to quickly relocate their production to the US. They benefit most from the recent reduction in import duties to 15 per cent. Even though this continues to weigh on them, it does level the playing field with trading partners from the EU, for example.

The fact is that there has been no inflation shock in the US so far. Despite all the (media) focus on US politics and the US market, traders are clearly reminding themselves that the world is a lot bigger than the United States. The US accounts for only 15 per cent of world trade. In addition, only a few countries have followed the example of US tariff policy. China, for example, has resorted to counter-tariffs. Other countries, on the other hand, have clearly distanced themselves from this practice. This has a stabilising effect on a global level, not least because the current situation offers potential for trade agreements with new partners. This is also evidenced by the agreements concluded this year between Switzerland and India, Mercosur and Thailand. They further reduce dependence on the US market.

Nevertheless, for certain industries there is no alternative to US business, such as the life sciences and pharmaceutical industries and the aircraft industry. However, it is not only customs issues that are causing problems. Medicines are currently still exempt from customs duties, but this could change tomorrow. Moreover, they may be forced to abandon their existing sales channels and switch to channels created by the Trump administration. Overall, it is clear that customs policy is not an effective means of location development and is only of limited use in strengthening economic growth in the long term, especially when it is so unclear and changeable.