Switzerland’s GDP grew by 0.1% in the second quarter of 2025, meeting expectations. The previous quarter’s growth was revised from 0.5% to 0.4%.
Year-on-year, GDP increased by 1.2%, falling short of the anticipated 1.4%. The prior annual growth figure was revised down from 2.0% to 1.8%.
Economic Growth Amid Challenges
When adjusted for sporting events, GDP also saw a 0.1% rise in Q2, following a 0.7% increase in the first quarter. The Swiss economy continues to show modest growth despite challenges.
The imposition of 39% tariffs presents a challenge for the economy in future quarters. The impact of these tariffs will be monitored closely moving forward.
The latest Swiss growth numbers show an economy that is essentially running in place. While the 0.1% quarterly growth avoided a contraction, the downward revisions to previous quarters and the miss on the yearly figure paint a picture of stagnating momentum. This weak footing makes the economy particularly vulnerable to external shocks.
Impact Of 39 Percent Tariffs
The real story for us is not this backward-looking data, but the forward-looking impact of the 39% tariffs. We know that the United States is a critical export market, accounting for over 16% of total Swiss goods exports in 2024, with pharmaceuticals and watches being key sectors. A hit this significant will almost certainly pressure corporate earnings and investment plans for major companies listed on the Swiss Market Index (SMI).
Given this high level of uncertainty, we see an opportunity in buying volatility. Implied volatility on both the SMI and currency pairs like EUR/CHF is likely to be mispriced ahead of the tariff implementation. We should consider buying straddles or strangles to position for a large price swing, regardless of the direction.
We can look back to the trade disputes of the late 2010s for a historical parallel. During that period, markets reacted sharply to tariff headlines, creating significant swings that were difficult to predict in direction but obvious in magnitude. Owning options proved to be a more effective strategy than holding a simple directional view on equities or currencies.
The Swiss Franc itself faces a complex situation, creating trading opportunities in the FX options market. While a major blow to the export economy is fundamentally negative for the franc, its safe-haven status could attract capital if these tariffs spark broader global risk aversion. This tug-of-war means a currency pair like USD/CHF could see sharp, unpredictable moves, making long volatility strategies attractive here as well.
