(MENAFN- Swissinfo) The pharmaceutical industry is a major driver of the Swiss economy, but its strength has also made it a key vulnerability for Switzerland in trade talks with the US. This content was published on August 6, 2025 - 15:43 7 minutes

I report on the Swiss pharmaceutical industry and healthcare topics such as access to medicine, biomedical innovation, and the impact of diseases like cancer. I grew up just outside San Francisco and studied international affairs with a focus on development economics and healthcare policy. Prior to joining SWI swissinfo in 2018, I was a freelance journalist and a researcher on business and human rights.

• More from this auth
• English Departme

President Trump's announcement of a 39% tariff rate on Swiss goods alarmed business leaders and sent politicians scrambling to Washington. The rate is more than double the one negotiated with the European Union (EU), and among the highest globally.

One sector breathed a sigh of relief – the pharmaceutical industry, which was exempt.

But it didn't take long before fingers were pointed at the industry.“Switzerland is being held hostage by the pharmaceutical industry,” Georges Korn, CEO of Swiss watchmaker Breitling, told the Swiss Neue Zürcher ZeitungExternal link newspaper on August 2.“This affects all export-oriented industries except one: cynically, the pharmaceutical industry, which is responsible for the situation, is exempt from the high tariffs for the time being.”

+ Swiss government reacts with great regret to new US tariffs

Trump has threatened tariffs of over 200% on pharmaceuticals but, aside from a 15% tariff on EU drugs, hasn't followed through, fearing price hikes.

Korn's frustration is understandable. Even if tariffs are negotiated down, the watch industry could suffer. Swiss watches need to be 60% manufactured in the country in order to be labeled“Swiss made”, which makes it difficult to move production to avoid tariffs.

Pharmaceuticals, however, make up 50–60% of Swiss exports to the US and contribute significantly to the $40 billion (CHF49.6 billion) trade deficit cited by Trump. In a CNBC interviewExternal link , Trump rejected Swiss president Karin Keller-Sutter's plea for a lower tariff, arguing the country makes“a fortune with pharmaceuticals”.

Experts suggest the tariffs are meant to incite Switzerland to put pressure on the pharma industry to lower drug prices. The same day he announced the Swiss tariff rate, Trump sent letters to 17 major pharmaceutical companies – including Swiss giant Novartis and Roche's US subsidiary Genentech – calling for immediate measures to lower drug prices in the US.

“Trump uses tariffs as a sort of instrument for blackmailing you,” Cecilia Malmström, former European Commissioner for Trade during the first Trump administration and currently a senior fellow at the Washington-based Peterson Institute for International Economics, told Swissinfo.“It's a way to punish a behavior he doesn't like.” And in Switzerland's case – it's high drug prices.

Switzerland's trade surplus with the US has been inflated by gold imports. After Trump's election in November 2024, US traders stockpiled gold, fearing tariffs. Switzerland, a major gold hub, saw a spike in exports. Without gold, its CHF48 billion surplus would be CHF25 billion.

The power of pharma

The idea that the Swiss economy is being held hostage by the pharmaceutical industry is misleading and economically untenable, according to Johannes von Mandach, the head of economic research at Zurich consulting firm Wellershof & Partners.

“International trade is not a zero-sum game,” wrote von Mandach in an email.“When a country like Switzerland specialises in a particular product or service, this is not an unfair advantage, but a desirable outcome of an international economy based on the division of labour.”

Malmström agrees, saying that the US claim of being disadvantaged is flawed.“You cannot simplify things to plus and minuses,” she said.“Trade doesn't necessarily have to be in balance if you trade on equal terms.”

More More Potential US tariff exemption for Swiss pharma is not necessarily a boon

This content was published on Jul 22, 2025 Donald Trump is pressuring the pharma industry with tariffs. But experts say that tariffs will have less impact on the industry than pricing.

Read more: Potential US tariff exemption for Swiss pharma is not necessarily a boo

MENAFN06082025000210011054ID1109894352