(Editor's Note: S&P Global Ratings believes there is a high degree of unpredictability around policy implementation by the U.S. administration and possible responses--specifically with regard to tariffs--and the potential effect on economies, supply chains, and credit conditions around the world. As a result, our baseline forecasts carry a significant amount of uncertainty. As situations evolve, we will gauge the macro and credit materiality of potential and actual policy shifts and reassess our guidance accordingly [see our research here: spglobal.com/ratings].)
This report does not constitute a rating action.
What's Happening
On May 8, 2025, the U.S. administration announced a 31% tariff on some Swiss goods, including machinery, watches, and agricultural products.
However, the application of these additional tariffs depends on ongoing legal proceedings and trade negotiations. On average, exports to the U.S. account for 16% of total exports of the eight cantons we rate, with the U.S. ranking among the top five trading partners in each of these cantons (see chart 1).
Chart 1
Why It Matters
Higher tariffs could harm Swiss cantons' competitiveness.
Together with the recent appreciation of the Swiss franc, which is considered a safe haven asset, tariff increases could impair Swiss exports, reduce trade volume, compress profit margins, and reduce earnings for several export-dependent companies. Additionally, the current trade tensions could lead to a decline in consumption, investment, and employment that might affect cantons' tax-financed budgets. Direct tariff effects on cantons include lower corporate profit tax revenues due to a contraction in business earnings.
Cantons' individual exposure to U.S. trade varies.
Role of exports in GDP: Total exports represent, on average, 30% of GDP in all rated Swiss cantons but Basel-City, where exports account for nearly 200% of GDP. In principle, this increases Basel-City's exposure to trade shocks. Basel-City is home to large pharmaceutical and life sciences companies, whose high-value goods translate into a very high export-to-GDP ratio.
Exposure of exports to the U.S.: Exports to the U.S. account for, on average, 16% of total exports in rated Swiss cantons. The share is highest in Aargau and Vaud (20%-21%) and lowest in Solothurn (12.7%) and Zurich (8.5%). However, these figures include all goods, regardless of their exposure to potential tariffs. This means the share of exports at risk and, thus, the potential economic effects will likely be lower than they would be if tariffs applied on all goods exports to the U.S.
Products affected: The announced tariffs would affect about seven product categories of the European Classification of Products by Activity, including agricultural products, machinery, and watches--all of which are among the main exports from Zurich, St. Gallen, Geneva, and Vaud. That said, pharmaceuticals and chemicals, which account for about 96% of Basel-City's total exports, are currently exempted, which reduces Basel-City's tariff exposure significantly.
We estimate total exports across rated cantons would reduce by an average of 3.3 percentage points.
In our calculations, we assume that the share of exports to the U.S. is proportionally distributed across all product categories. For example, if 21% of a canton's total exports are destined for the U.S., we assume 21% of each export category is exported to the U.S. and, thus, potentially affected by the announced tariffs. Considering the announced tariff rate of 31% and the price elasticity of trade by sector (as referenced in our "Economic Outlook Eurozone Q2 2025: A World In Limbo," published March 25, 2025), we estimate total exports across rated cantons would reduce by 3.3 percentage points (ppts). The decline would be less pronounced in Basel-City (0.1 ppts), as pharmaceuticals are not affected, and more evident in St. Gallen (5.3 ppts), Vaud (4.1 ppts), and Aargau (3.9 ppts). Cantonal GDP would decrease by an average of 1 ppt.
What Comes Next
We do not expect tariffs to have a material effect on the fiscal health of rated Swiss cantons.
Notably, many Swiss companies derive a substantial portion of their profits from activities that are not directly affected by tariffs, such as research and development, licensing, royalties, and other value-added services. This diversification helps mitigate the risk of substantial corporate tax shortfalls.
Even if tariffs were implemented this year, any resulting decline in tax collection would likely not occur until 2027. This is due to the timeline for businesses to report earnings and remit taxes, and because many Swiss companies accelerated exports in the first quarter of 2025.
While we do not expect tariffs to directly affect our ratings, escalating protectionism will likely increase uncertainty, heighten economic risks, and dampen growth prospects.
This may increase existing vulnerabilities and budgetary pressures, particularly considering ongoing federal cost-cutting plans and canton-specific tax reforms aimed at enhancing competitiveness. However, we note that most ratings on Swiss cantons currently have stable outlooks. Thanks to adequate fiscal buffers, these cantons' creditworthiness would not deteriorate in the case of temporary revenue disruptions.
We currently rate eight Swiss cantons publicly, with ratings ranging from 'AA+' to 'AAA'. The ratings on Swiss cantons benefit from an exceptionally predictable institutional framework and prudent financial management.
Related Research
- Credit Conditions Europe Q2 2025: Europe Plots A New Course, March 26, 2025
- Economic Outlook Eurozone Q2 2025: A World In Limbo, March 25, 2025
- Institutional Framework Assessment: Swiss Cantons Use Fiscal Autonomy To Retain Attractiveness, Jan. 31, 2025
- Subnational Government Outlook 2025: Swiss Cantons Are Navigating Budgetary Pressures And Shifting Debt Dynamics, Jan. 16, 2025
| Primary Contact: | Didre Schneider, Frankfurt 49-69-33-999-244; didre.schneider@spglobal.com |
| Secondary Contact: | Raphael Robiatti, Frankfurt 1737016203; raphael.robiatti@spglobal.com |
| Lead Analyst: | Michael Stroschein, Frankfurt 49-693-399-9251; michael.stroschein@spglobal.com |
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