A week ago, the Swiss National Bank (SNB) cut its key interest rate to zero. Due to the specific nature of monetary policy implementation—amid a system still flush with excess liquidity—the SARON, the most important short-term money market rate (which, according to SNB policy, should closely track the key rate), has since slipped slightly into negative territory.

During the presentation of the rate decision, the SNB Governing Board repeatedly referred to trade policy tensions and uncertainties—primarily meaning the new U.S. tariff policies. These also take center stage in the «Economic Signals» report included in the SNB’s quarterly bulletin published on Wednesday.

A Supplement to Econometric Models

The report is based on information gathered by the SNB’s regional economic delegates in conversations with corporate executives across Switzerland. A total of 241 interviews were conducted and evaluated between April and June. Known as the «Blue Book» in reference to the Beige Book of the U.S. Federal Reserve, the report provides the SNB’s Governing Board with empirically grounded insights to complement its otherwise model-heavy decision-making process.

Naturally, the industrial sector is most affected by tariff policy. Sales have grown only marginally, suggesting that the recovery observed in the first quarter may already be fading.

Policy Shifts in Washington Create Uncertainty

The SNB is explicit in its analysis: «Particularly burdensome is the uncertainty caused by repeated policy changes by the U.S. government. Companies report that their customers are hesitant to place orders and are postponing investment decisions. Some companies are also experiencing reduced demand, as their products have become more expensive in the U.S. due to import tariffs.»

This is having an impact on margins and employment. Industrial firms report shrinking margins and view their current staffing levels as «significantly too high.»

How Industry Is Suffering Under U.S. Tariff Policy

One in five companies surveyed reported direct negative effects from the new U.S. trade policy on order volumes, prices, and margins. These are primarily export-oriented industrial companies whose products are directly subject to tariffs (the general 10 percent tariff has applied since the so-called «Liberation Day»). In some cases, it is the clients—not the companies themselves—who are affected by tariffs.

What’s particularly revealing is how firms are responding. Central to their reaction is the competitive situation in the U.S. market. «If companies face little competition, customers generally absorb the tariffs. Price negotiations are also easier when the Swiss intermediate product represents only a small portion of the total cost of the final product purchased in the U.S.,» the SNB explains.

However, not all costs can be passed on. Companies that compete directly with U.S. firms and produce almost their entire product in Switzerland face greater challenges.

No Shift to U.S. Production Sites

The architect of the new U.S. tariff policy would likely be disappointed to learn that virtually no companies plan to shift production to the U.S. due to the tariffs. Barriers include high investment costs, the long time required to set up production, lack of supplier networks in the U.S., and shortages of skilled labor. The hope that steep tariffs would spark reindustrialization in the U.S. appears unmet.

Indirect Effects—and Even Competitive Advantages

Among the 80 percent of companies not directly affected, many note that the new tariff regime could still impact them indirectly through a slowdown in global demand, Swiss franc appreciation, or a deterioration in consumer sentiment. Interestingly, some report competitive advantages: Chinese competitors are burdened by higher U.S. tariffs, and U.S. rivals are similarly disadvantaged in China.

That said, not all of Switzerland’s industry is equally affected. The machinery and metal industries have already been suffering due to the crisis in Germany’s automotive sector—now compounded by tariff shocks. The watch industry, too, has long been under pressure.

Infrastructure Boom and Defense Demand in Europe

In contrast, medical technology and pharmaceutical companies, along with their suppliers, are seeing positive business development. «Demand for products supporting transportation and energy infrastructure is also increasing,» the SNB reports. Meanwhile, Trump’s new geopolitical stance is having beneficial effects in other sectors, such as Swiss suppliers to foreign defense industries, which are reporting stronger sales.

Effects on the Financial Sector

The SNB also notes indirect effects on the financial sector: «In wealth management, the brief stock market dip in April and the depreciation of the U.S. dollar have reduced fee income tied to asset values. Conversely, market volatility has had a partly positive effect on trading revenues.» In lending, however, monetary policy dominates: «Falling interest rates are putting pressure on margins that are otherwise solid.»

ESC as a Highlight in Basel, Trump’s Austerity Dampens Arc Lémanique

The SNB delegates also sprinkle in some lighter notes. For example, this year’s Eurovision Song Contest (ESC), held in Basel, is explicitly mentioned—in contrast to Taylor Swift’s Zurich concerts in 2024, which went unnamed. The ESC boosted business for hotels and restaurants in the Basel region.

However, even this sector is not immune to collateral damage from U.S. policy shifts. In the Lake Geneva region, there’s been a decline in event activity, attributed at least in part to the U.S. cutting contributions to international organizations, many of which are headquartered there.