Trump tariffs widen trade war, threatening allies and global rules

BERN, Switzerland (AN) – Punishing new American tariffs went into effect, hitting Switzerland with a 39% rate that stands as the highest among developed nations and adding a new chapter to a global trade war.

The 39% surcharge applies to all Swiss products loaded on a vessel for transport to the U.S. as of Thursday, according to guidance from U.S. Customs and Border Protection. However, key exports like pharmaceuticals and gold are so far exempt from the tariff.

The measures triggered a formal challenge at the World Trade Organization from Brazil, underscoring the escalating threat to the post-war global trading system. The U.S. government has not made comments about Brazil's move.

U.S. President Donald Trump has also warned that he will announce tariffs on pharmaceutical imports "within the next week or so," with levies potentially going as high as 250%.

The new rate went into force after Swiss President Karin Keller-Sutter's last-ditch effort to secure a deal in Washington failed. Keller-Sutter, who also serves as finance minister, took a two-day emergency trip along with Economics Minister Guy Parmelin, but were unable to meet with Trump.

Instead, they spoke with Secretary of State Marco Rubio, whose department does not lead trade negotiations. U.S. State Department spokesperson Tammy Bruce said the three discussed "the importance of a fair and balanced trade relationship that benefits the American people. They also reaffirmed their commitment to strengthening bilateral defense cooperation."

The Swiss Federal Council, the nation's seven-member executive body, convened an extraordinary meeting on Thursday afternoon to assess the new trade situation and determine its next steps. In a statement released following the meeting, the Federal Council acknowledged the imposition of the 39% tariffs and stated its commitment to continue negotiations with the U.S. with the aim of reducing them "as swiftly as possible."

The Federal Council noted that the 39% rate is "particularly steep" when compared to other U.S. trading partners with similar economic structures; the European Union, 15%, United Kingdom, 10%, Japan, 15%. Nearly 60% of Swiss exports to the U.S. are subject to these tariffs, which do not apply to goods already in transit, offering a short window for some importers.

The head of Swissmem, the country's mechanical and electrical engineering trade association, called the move an "attack on Switzerland." The organization warned he 39% import tariff will make the Swiss tech industry’s export business to the U.S. "effectively dead." Swissmem gave a 10-point list of demands to the government calling for urgent measures to support the export industry, and warned if it suffers the "prosperity of the entire population is at risk."

The Federal Council, in its statement, responded to these concerns by outlining a series of measures. It said that tariff countermeasures in response to the U.S. increases are not being considered, as they would impose additional costs on the Swiss economy.

Instead, the government is focusing on diversifying trade relations with other international partners and has tasked two federal agencies with examining potential relief measures for Swiss businesses, including administrative simplifications for accessing short-time working compensation, an established instrument for preserving jobs during temporary economic downturns.

The Federal Council also noted that Parliament is considering extending the maximum entitlement period for short-time work compensation from 18 to 24 months.

WTO needs a 'revamp'

The tariffs are already having an effect on the U.S. economy, with businesses warning of rising costs and economists raising concerns about a possible "stagflation-esque" environment.

In addition to the 39% rate on Switzerland, Trump issued an executive order placing an additional 25% tariff on imports from India over its purchases of Russian oil.

The new tariff, which will raise India's total rate to 50%, will take effect on Aug. 27. India's foreign ministry said the tariff is "unfair, unjustified and unreasonable."

The focus of the international response has quickly turned to the WTO. Brazil, which faced a 50% tariff on many of its goods that went into effect, filed a formal request for consultations.

The tariffs on Brazil were directly tied by Trump to the judicial situation of his political ally, former President Jair Bolsonaro, who is under house arrest. Brazil’s foreign ministry accused the U.S. of "flagrantly violating" key WTO commitments, including the "most favored nation" principle.

The complaint highlights a weakness in WTO's appellate body, which was effectively paralyzed by the first Trump administration due to the U.S. blocking the appointment of new judges. That continued under the Biden administration, preventing the body from hearing new appeals, and has hindered WTO's ability to resolve trade disputes and enforce its rules.

Brazil's government estimates that 35.9% of the country's goods shipped to the American market have been affected, about 4% of its total exports. President Luiz Inácio Lula da Silva said the trade body needs a "revamp" to effectively mediate such conflicts.

This story has been updated with additional details.