The United States’ 39% tariff does not apply to pharmaceuticals exported from Switzerland. Pharmaceuticals are Switzerland’s largest export sector, making up around 40% of total exports by value, with 60% of these directed to the US. This exemption is therefore notable given the importance of pharmaceuticals in Swiss exports.
Malaysia has also confirmed that its 19% tariff rate will exempt pharmaceuticals and semiconductors. There has been no request or agreement from the US concerning Malaysian rare earth supply in tariff discussions. Malaysia ranks as the second-largest exporter of rare earth minerals to the US, after China. The gap between Malaysia and China is significant, yet Malaysia still holds a share of around 13%, with the rest of the world excluding China at 17%.
Trade Tensions Easing
We are seeing signs that recent trade tensions may not escalate into a full-blown crisis. The VIX, which had been creeping up towards 20 over the last few weeks of July 2025, is likely to fall back. Traders should consider selling volatility, as the exemptions for Switzerland and Malaysia remove a significant amount of market uncertainty.
The Swiss franc is positioned to strengthen considerably against the dollar. With pharmaceuticals accounting for such a large portion of Swiss exports directly to the US, this tariff exemption is a major economic relief. Looking back at the currency’s behavior, we saw the CHF rally sharply in late 2023 when similar trade fears proved to be overblown, and current positioning suggests a similar move could unfold.
This news specifically de-risks the pharmaceutical sector, which has been lagging. The Health Care Select Sector SPDR Fund (XLV) has underperformed the S&P 500 by nearly 4% year-to-date in 2025, and this could be the catalyst for it to catch up. We expect to see bullish activity in call options for major pharmaceutical and healthcare ETFs in the coming weeks.
Boost for Semiconductor Sector
Similarly, the exemption for Malaysian semiconductors provides a tailwind for the tech sector. The global chip supply chain, which saw a dip in sales according to the latest June 2025 industry report, gets a dose of stability from this news. This reinforces the case for being long on semiconductor ETFs like the SMH, as a key supply chain risk has now been averted.
The situation with rare earths, however, introduces a different kind of trade. Malaysia’s statement that there is no agreement with the US suggests the supply issue for minerals outside of China remains unresolved. This uncertainty is reminiscent of the price spikes we saw in 2019 and could lead to volatility in miners, making options on an ETF like REMX an interesting play on future headlines.
