After months of fruitless trade talks between Washington and Bern, Switzerland now has less than a week to reach an agreement before the new US tariffs take effect. If a deal is struck in time, the USDCHF pair may resume its downward trend. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
The US has imposed a 39% tariff on Switzerland.Washington is not satisfied with Bern’s proposals.The foreign trade deficit is caused by a decline in gold prices.If the USDCHF pair retreats from 0,8135, one may consider short trades.
Weekly Fundamental Forecast for Franc
Neutrality is no shield in a trade war. Switzerland’s long-standing policy of staying out of geopolitical disputes offered little defense against Donald Trump’s hardline tactics. The US president blindsided Bern with a 39% tariff, far steeper than the 10% duty imposed in April and the 31% announced on Independence Day. Ultimately, these escalating figures have fueled volatility in the USDCHF pair.
The US considers Switzerland a currency manipulator, a charge rooted in the Swiss National Bank’s history of unmasked interventions in the Forex market until 2025. Mounting pressure from Washington forced the SNB to stay on the sidelines for five consecutive quarters, contributing to notable losses this year. However, the recently imposed 39% tariff represents a far more severe threat to the Swiss economy. Capital Economics estimates it could shave 0.6 percentage points off GDP, effectively derailing the government’s already fragile 1% growth target.
Us Trade Deficits with Other Countries
Source: Wall Street Journal.
The US trade deficit with Switzerland reached $38 billion by the end of 2024, making it the 13th largest with any trading partner. Despite this, Donald Trump imposed a 39% tariff, starting from August 8, allowing a week for Bern to negotiate. Unfortunately, no trade agreement has materialized in recent months. Switzerland proposed $150 billion in investments and lower tariffs than those in the EU, but the US administration is seeking more concessions.
It’s ironic that Swiss pharmaceuticals, watches, and chocolate are bearing the brunt of US tariffs, while the real trade imbalance stems from gold. Switzerland serves as a key hub for precious metals moving from South America and Africa to the US and UK, inflating export figures and making the country an easy target.
Gold Trade and Balance of Trade
Source: Bloomberg.
The country’s neutrality, currency interventions, and its intermediary status in gold trading have turned out to be a disaster for Switzerland. The country’s tariff is 39% higher than that of other nations, excluding China. However, this situation is adversely affecting not just the European economy but also American consumers. The strengthening of the Swiss franc against the US dollar, combined with high import duties, is driving up prices for watches, chocolate, and medicines, while overall inflation continues to accelerate.
The US may be acting like a trade bully, but there’s still a chance a last-minute deal with Switzerland could be reached. Such an outcome would give USDCHF bears room to breathe and potentially resume their attack that began after the latest US jobs report.
Weekly USDCHF Trading Plan
The USDCHF pair reached the first target of 0.8145 set for the previous long trades. After that, the asset started to decline. The risks of the downtrend are growing. If the USDCHF pair fails to stay above 0.805 or rebounds from 0.8135, short trades can be considered.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of USDCHF in real time mode
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