The Swiss franc is experiencing losses following recent announcements on tariff increases by Trump.
The tariff rate on Canada has been raised to 35% from an initial 25%.
Switzerland Tariff Rate Changes
Switzerland faces a new tariff rate of 39% on its goods.
Additionally, goods suspected of being transshipped to evade duties will incur an extra 40% tariff.
These changes are having an impact on the session.
The updated tariff on Canada becomes effective on August 1.
Other tariffs are scheduled to take effect in seven days.
The new 39% tariff on Switzerland is a direct hit on its economy, which explains the franc’s immediate weakness. We should anticipate further declines in the CHF as markets digest this news over the coming days. Look for opportunities to short the franc, likely through buying put options or taking long positions in USD/CHF.
This isn’t a small disruption; Switzerland’s trade relationship with the U.S. is massive, with exports of goods like pharmaceuticals and chemicals exceeding $67 billion in 2024. The tariffs will severely impact earnings for major Swiss companies, crippling a pillar of their economy. This fundamental damage supports a sustained bearish view on the franc for the next several weeks.
Impact on Swiss Market Index
We believe the Swiss Market Index (SMI) is vulnerable to a significant downturn. Companies like Roche, Novartis, and Swatch Group are now facing major headwinds to their U.S. sales. Traders should consider buying put options on the SMI or on exchange-traded funds that track Swiss equities.
This situation feels a lot like the market reaction we saw during the 2018 trade conflict with China, which led to sharp equity losses and a spike in volatility. We expect the Swiss National Bank may be forced to intervene, potentially through an interest rate cut to support the economy. Such a move would add even more downward pressure on the franc.
Given the high level of uncertainty, implied volatility in currency pairs like USD/CHF and EUR/CHF is set to rise sharply. This makes buying volatility a viable strategy. We are looking at straddles or strangles, which would profit from a large price swing in either direction as the market figures out the full impact.
We also can’t ignore the 35% tariff on Canada, which is a major exporter of oil and raw materials to the U.S. This will likely weigh on the Canadian dollar and equities tied to the natural resources sector. We see this as a secondary opportunity to establish bearish positions on the CAD, though the focus remains on the franc.
