Textbook lose-lose

@dmuthuk 

 https://x.com/dmuthuk/status/1951634326766149690?t=aXrzEzu0dDG97rAvs_n_EQ&s=19

Switzerland is a small country with just 9 million population. We are upset that Trump levied a tariff of 25%. For Switzerland, he has levied a tariff of 39%, among the highest in the world. I've a reproduced the post by a Swiss investor @BurggrabenH. Look at the clarity. Look at the skill and moat such a tiny nation has developed. What a manufacturing power.

Here is the post:

A Few Thoughts on Trump’s 39% Tariff on Swiss Imports as announced on our National Day (1 August commemorates the founding of the Swiss Confederation in 1291).

Clearly, Keller-Sutter is no match for Trump’s ego. That, according to Bloomberg, was the real issue and I wouldn’t be surprised if this isn’t the final number. But that’s beside the point.

For decades, the relentlessly strong Swiss franc forced our industrial base to evolve. Labor-intensive sectors like textiles vanished. What remains is ultra-specialized, high-margin, low-volume manufacturing. Precision over scale. Expertise over replication.

Take VAT Group—maker of the world’s best vacuum valves for semiconductors, with an 85% global market share. Volumes are low, clients few. A second plant? Economically senseless—especially in the U.S., where demand is thin.

Lantal, based in Langenthal, leads in flame-resistant aircraft textiles, supplying both Airbus and Boeing—Airbus being top, Boeing likely second. High-spec, low-volume, irreplicable.

Swatch Group operates within the watchmaking ecosystem of Jura and Neuchâtel, where ~95% of mechanical movements are produced—by Swatch, Rolex, and Patek Philippe. The rest of the world? Mostly design and assembly. Not real manufacturing.

These aren’t exceptions—they’re the rule. For 50+ years, the Swiss franc has priced out commodity production. Only firms with pricing power, deep moats, or tight local ecosystems survived. With a tiny domestic market, internationalization was a necessity, not a choice.

Today, Switzerland dominates niches: luxury watches, pharma, med tech (Straumann, Synthes, Stratec), financial services (UBS, Swiss Re), inspection (SGS), premium chocolate (Lindt), food (Nestlé), precision machinery (ABB), and tech R&D (ETH, Google, Microsoft, Meta, OpenAI).

This model is fundamentally incompatible with Trump’s “bring manufacturing home” mantra. Swiss factories won’t relocate. Tariffs won’t change that.

Germany can adapt—Mercedes can expand U.S. output to hedge FX and tariff risk. Switzerland can’t. “Swiss made” is niche, immobile, and precision-built.

Meanwhile, we import nearly everything else—cars, appliances, food, raw materials. Switzerland is a textbook case of high-value specialization and free trade, just as Milton Friedman described.

So what does a 39% tariff do? Trigger workarounds. Americans will still buy Rolexes—tariff or not. Likely here on Bahnhofstrasse in Zurich.

Trump’s logic collapses. It’s neither strategic nor economic. And no, Switzerland hasn’t “taken advantage” of the U.S. We specialized—just as classical trade theory prescribes.

Also: we’re not China. No subsidized overcapacity. No dumping. No labor abuse. No IP theft. We follow WTO rules. Our manufacturing jobs are among the best-paid globally. And we’re the only direct democracy globally (all others are indirectly democracies)—hardly a CCP clone.

So what exactly is Trump trying to fix?

Switzerland is comparative advantage, executed. No, it doesn’t deliver balanced trade for every nation. It’s not meant to. We export what we excel at—and import the rest.

Trump’s tariff push looks less like policy and more like politics: revenue-driven, reactionary, and ego-fueled. Sometimes disruption is needed. But this is pure economic illiteracy.

In the end, nobody wins. Rolex and Novartis won’t eat the cost. U.S. consumers will. Sales may dip—but Rolex won’t blink—believe me; not in the next 100 years and as long as humans seek status symbols.

It’s a textbook lose-lose.