What Trump’s return or a new Harris administration would mean for Switzerland snbchf.com

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What Trump’s return or a new Harris administration would mean for Switzerland — Analysts say Trump's term in office showed his governing style to be transactional. Harris, they say, has shown a willingness to be more collaborative with European allies. The Associated Press

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With the United States presidential election looming, Switzerland – along with the rest of Europe – is bracing itself for the implications of the result for its security and prosperity.

This content was published on October 28, 2024 - 09:00

10 minutes

Swiss diplomats often say that the party affiliation of the occupant of the White House changes very little for Switzerland. Whether the sitting president of the United States is a Democrat or a Republican, “relations between the two countries have always been excellent,” former Swiss ambassador Jacques Pitteloud said shortly before leaving Washington this summer.

But the current US election cycle is challenging this notion. Across Europe, countries are “really thinking through what a second [Donald] Trump presidency would mean for foreign, security and economic policy,” said Laura von Daniels, head of the Americas research division at the German Institute for International and Security Affairs.

On trade and security, Trump and Democratic nominee Kamala Harris have expressed vastly different policy ideas, as well as governing styles. How either will approach international trade and handle transatlantic relations will have a direct impact on Switzerland. The country, although not a member of NATO, relies on the defence alliance for its security. The EU and the US are also its most important trading partners.

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With the presidential race too close to call, Switzerland needs to do more to prepare for a scenario in which Trump is elected on November 5, said Aurèle Cotton, a policy fellow at Swiss foreign policy think tank Foraus. “We expect that the ‘America First’ trend we saw in his first administration will significantly influence his foreign policy agenda, both on the security side and economically,” he said.

US leadership in NATO ‘indispensable’

During his tenure in the White House, Trump regularly scolded NATO countries whose defence spending fell shortExternal link of a target of at least 2% of their GDP, including Germany, Italy and France. The US, by contrast, spends nearly 3.5% of its GDP on defence and contributes around 70% of NATO’s budget.

More recently on the campaign trail, the former president has suggested that the US under his leadership “would not protect” its allies, sayingExternal link at one rally: “I would encourage [the Russians] to do whatever the hell they want.”

“Even if it’s just words, they have an impact on NATO’s deterrence [capability],” said Cotton. “Trump sees NATO as a burden on US taxpayers and as the US subsidising European security.”

Yet American leadership in the organisation is indispensable. “Most security experts agree that it’s not a viable security alliance without US political leadership and its ability to bring all members to agree on certain outcomes or policies,” said von Daniels.

Trump and Harris are vying for the presidency at a time when Switzerland is rethinking its approach to neutrality and considering moving towards closer military cooperation with NATO, said Cotton. “So Switzerland has no interest in a weaker NATO.” Moving closer to the military alliance is part of the country’s attempt to bolster its defence capabilityExternal link following Russia’s invasion of Ukraine.

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Europeans are also wary of Trump’s assertion that, if elected, he would rapidly conclude a deal with Russia to end that war. To achieve this, analysts believe Trump could force Ukraine to accept certain conditions, such as ceding territory to Russia or agreeing to remain outside the EU.

“If the US were to pressure Ukraine into making significant unilateral concessions, it could set a dangerous precedent that would violate all of the principles – of territorial integrity and the UN CharterExternal link – that the EU and Switzerland hold dear,” said Cotton. “The risk is that this emboldens Russia to take additional aggressive steps, perhaps even in the Baltic states.” He added: “We’re a part of the European security architecture, so this would have a damaging second-order impact on our own security as well.”

Under Harris, experts sayExternal link the US relationship with Europe is likely to be more collaborative and continue to underpin security on the continent, as it has under the outgoing Democrat president Joe Biden.

“She has stated numerous times that she’s a strong supporter of the transatlantic security relationship, that she values NATO as an organisation, and that she thinks working with allies is an important element of US foreign and security policy,” said von Daniels.

While in Switzerland last June for the Summit on Peace in Ukraine, Harris reiteratedExternal link the US “commitment to stand with Ukraine”, adding it is in America’s interests “to stand up to dictators, and stand with our allies and partners”.

Tariffs a concern for Swiss businesses

While Harris and Trump don’t see eye to eye on transatlantic relations, a bipartisan consensus does exist on the need to contain China, which the US considers a strategic rival. But how this rivalry affects US allies in Europe will depend on who’s in the White House.

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“Trump was in favour of a full economic decoupling from China and he expected other countries to do the same,” said von Daniels. Under Harris, on the other hand, she believes the US and the EU would be engaged in “intense debates about what to do and how to implement de-risking and in which areas”.

Switzerland is currently in talks with China, its third-largest trading partner, to update their free trade agreement, in force since 2014. It has also not adopted sanctions against China imposed by the EU, the US and other Western countries over alleged human rights abuses against the Uyghur population.

Under Trump, whose approach both von Daniels and Cotton characterised as transactional, “there is a risk that Switzerland could be singled out because it is seen as having this preferred status with China,” said Cotton.

During Democrat Joe Biden’s tenure, US ambassador to Switzerland Scott Miller has not been shy about criticising the country for its refusal – for reasons of neutrality – to allow the re-export of Swiss weapons to Ukraine. Miller has also said Bern could be doing more to block Russian assets subject to sanctions.

His predecessor under Republican Donald Trump, Ed McMullen, struck a friendlier tone in the press and facilitated high-level exchanges between Swiss and US officials. McMullen recently toldExternal link Swiss newspaper SonntagsZeitung that Trump admired “the history of the Swiss Confederation”.

Differing opinions aside, under both presidents Swiss exports to the US grew steadily, while Switzerland’s role as a protective power for the US in Iran has earned it kudos in Washington from Republican and Democrat leaders alike.

During his election campaign, Trump has talked about imposing hefty tariffs of 10% or even 20% on imported goods – a concern for Swiss businesses, as the US is Switzerland’s biggest export market.

“[Tariffs] are one of Trump’s key policy prescriptions,” said Cotton. “It would hit Swiss exporters just like anyone else.” But the impact would be different depending on the sector, he added.

“The goods we tend to export are sophisticated, high-end and expensive,” Cotton explained. “So the absorption capacity [for tariffs] within the cost structure of many Swiss businesses is very low.” An alternative would be to pass the cost on to the consumer, but this would make Swiss exporters less competitive. On the other hand, said Cotton, Swiss exports tend to be harder to substitute than other goods, so assessing the overall impact of the tariffs is difficult.

A bigger concern, according to Cotton, is how Switzerland might be affected by retaliatory measures from other trade partners in the event of a trade war. When the Trump administration imposed a 25% tariff on imported steel and a 10% tariff on aluminium in 2018, the EU issued retaliatory tariff quotas on these metals – and Switzerland was not exempt from them.

Harris ‘open to negotiating with allies’

Harris has criticised Trump’s proposal to impose tariffs again. However, von Daniels believes that were she to be elected, it would be prudent for Europe not to be naïve. “There is a certain degree of competition between the EU as a single market and the US economy,” she said. “I think it’s entirely possible that Harris would also draw on unilateral measures.”

But, von Daniels said, Harris is unlikely to spring trade barriers on partners without warning: “Her baseline approach is one that’s open to negotiating with allies and bringing together a broader group of countries to implement policies, because it’s more efficient and less costly to US interests.”

Biden himself has favoured this approach. His administration, for example, deployed export restrictions on advanced technologies in a bid to prevent adversaries such as China from developing equipment that could harm US security – but only after it consultedExternal link international partners to ensure their measures were aligned.

Should Harris as president seek this type of collaboration, it will be good news for Switzerland. “Because it likes a rules-based trade system with a strong role for the World Trade Organization, Switzerland has no interest in the fragmentation of trade or the rise in trade barriers,” said Cotton.

Switzerland has in fact sought to conclude an FTA with the US for several years – because it would give Swiss exporters “better market access and… a big competitive advantage over EU exporters,” said the analyst. While the Biden administration has called FTAs “a relic of the 20^th century”, under Trump the US was receptive to a deal. The two countries even began exploratory talks.

“There was some good momentum behind that,” said Cotton. “Whether this momentum would come back in a second Trump presidency is an open question.”

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Edited by Lindsey Johnstone/vm

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