After Switzerland failed to reach a trade agreement with the US last week and faces the highest tariffs in Europe on imports to the US, UBS Global Wealth Management reacts. Other countries, such as India, also face sweeping tariffs while deals have just been struck with South Korea, Japan.

Switzerland was unable to reach a trade agreement with the US just before the 1 August deadline hit. Now the country faces tariffs of 39 per cent, unless a deal is clinched before 7 August.

On Friday, the Swiss government said that it was disappointed by the lack of an agreement but it remains in contact with the US authorities and still hopes to find a negotiated solution.

The new list of tariff rates that will apply from 7 August was published by the US government last Thursday, raising them to 39 per cent. The proposed tariff rate on Liberation Day in April was 31 per cent, and 10 per cent during the subsequent “reciprocal” tariff pause, which ended on 1 August.

The US is an important trading partner for Switzerland and accounted for around 19 per cent of all Swiss goods exports in 2024. The Swiss trade deficit with the US was $47.4 billion in 2024; if service industries are included, the deficit shrinks to $22 billion. Switzerland sells more goods to the US than it buys –mainly pharmaceuticals, gold jewellery, watches and machine tools.

However, UBS Global Wealth Management's Chief Investment Office base case remains that Switzerland and the US will reach a tariff deal similar to the agreement between the EU and the US with 15 per cent tariffs and a commitment for Swiss companies to make significant investments in the US. A trade agreement comparable with the EU would significantly impact Swiss exports to the US, but would be manageable, in UBS GWM's view.

A key issue for Switzerland is the levies on its pharmaceutical products. These account for around 60 per cent of Swiss goods exports to the US.

“Given Switzerland’s exposure to pharmaceutical exports, the outcome of Section 232 tariff investigations and US President Donald Trump's efforts to lower the prices of pharmaceutical products play an equally important role for foreign trade. In our base case, we expect weak growth but no recession for the Swiss economy in the coming quarters,” UBS GWM said in a note.  

Out of the US sales, an estimated two-thirds are locally produced, with the remaining third partially imported from Switzerland. UBS GWM noted that a majority of these imports from Switzerland are pharmaceutical products that remain exempt from new US tariffs at this stage. In sum, the direct impact on the overall Swiss equity market from the newly-announced US tariffs will be negative, but not destructive, in UBS’s view.

Certain parts of the market may be impacted more significantly, including watch and machinery manufacturers as well as parts of medtech. Moreover, smaller companies tend to be more reliant on exports and are thus more at risk.

UBS GWM recommends that investors focus on quality firms and services companies, including those in the telecommunication, healthcare, and consumer staples sectors, as well as select mid-caps and cyclicals. Its favoured investment theme is attractively valued high-yield equities with dividend growth.

Other trade partners
The Trump administration unveiled a range of new tariffs on many US trading partners on 1 August, saying that these aimed to address a “continued lack of reciprocity in our bilateral trade relationships.” Canada, for instance, faces tariffs of 35 per cent, although most goods will avoid the increased costs because they are exempt under the North American trade treaty. Brazil also faces tariffs of up to 50 per cent, with some exemptions, for example orange juice. While the US decision to impose 25 per cent tariffs on goods imported from India could affect the country's growth prospects.

Mike Sell, head of global emerging market equities at Alquity believes that this is a negotiating tactic, as has happened over recent months with other countries. "India has been negotiating a broader Free Trade Agreement (FTA) with the US, following India’s 2025 FTA agreement with the UK, and Prime Minister Modi has previously announced a target to increase bilateral trade from $191 billion in 2024 to $500 billion by 2030. We do not think that these longer-term ambitions have changed," Sell said. He highlighted that India’s exports to the US represent 2.5 per cent of Indian GDP, less than a tenth of that of Vietnam or Mexico. India’s 6.5 per cent+ predicted GDP growth over the coming years is driven by domestic factors such as demographics, urbanisation and the shift from the informal to the formal sector – not exports.

While the direct GDP impact may be modest, Todd McClone, portfolio manager, William Blair Emerging Markets Growth Fund, thinks that the announcement adds to market volatility at a time when global risk sentiment is already fragile. Importantly, India’s growth forecasts had already priced in some tariff headwinds. From a sector perspective, McClone believes that the impact will be uneven. Pharmaceuticals, India’s second-largest export to the US, appear to be exempt, which is critical given India supplies ~60 per cent of US oral drugs. Electronics, on the other hand, could face headwinds, but McClone's view is that India still holds a relative edge over China. The services sector, including IT, remains unaffected for now. Despite this headwind, McClone believes that India’s broader outlook is improving. "Monetary policy is supportive, earnings expectations have reset, and foreign investor positioning is already very light, as evidenced by recent outflows. In that context, any eventual resolution or moderation of these tariffs could act as a positive surprise," McClone said. "The sixth round of US-India trade negotiations is expected in the second half of August, with a more definitive agreement likely by September or October. "

Meanwhile, on Wednesday President Trump said that a deal had been reached with South Korea that would impose a 15 per cent tariff on imports to the US for South Korea, which was praised by South Korean leader Lee Jae Myung. South Korea had been facing a 25 per cent levy if it had not struck a deal. The 15 per cent tariff rate will cover both cars and semiconductors, two of the country's main exports to the US. But steel and aluminium will be taxed at 50 per cent, in line with the global rate set by Trump.

A trade framework to impose 15 per cent tariffs on Japan, a key competitor in the car and manufacturing industries, has also been struck. Agreements have also been made with the EU and the UK, amongst others. See more commentary here, here and here.