President Trump is levying tariffs on several major trading partners. And they’re striking back.
China says it’s prepared for “the biggest trade war in economic history” and promises to impose retaliatory tariffs of “equal scale and equal strength” on U.S. goods. The European Union has slapped tariffs on U.S. products ranging from bourbon to motorcycles. And Mexico has hiked tariffs on $3 billion worth of American imports.
These countries are playing with fire — a full-blown trade war could deeply damage their economies since they’re heavily dependent on exporting goods to America. They’d be wise to de-escalate tensions and address the structural trade imbalances that have angered President Trump.
For inspiration, they could look to Switzerland, a famously neutral country that has quietly carried on a balanced and mutually beneficial trading relationship with the United States.
Switzerland’s economic ties to the United States date back to the mid-1800s. As of 2016, Switzerland — which has a population of just 8 million people — was one of the United States’ largest trading partners. The two nations traded $115 billion in goods and services.
The benefits flow both ways. The United States imported $14 billion more goods than it exported to Switzerland. But the United States also sold $9 billion more in services than it purchased.
As a result, the total U.S. trade deficit with Switzerland was less than $5 billion — a pittance compared to our $375 billion deficit with China and our $71 billion deficit with Mexico.
Swiss firms have also made substantial direct investments in the United States.
For example, drug manufacturer Novartis is bringing a $55 million gene therapy production plant and 200 jobs to North Carolina. Swiss chocolate maker Lindt, which has located half of its factories in America, is expanding its Stratham, New Hampshire plant with a $201 million investment. This March, Swiss synthetic flooring company Gezolan opened a $12 million plant in Georgia.
And in July, Swiss satellite manufacturing company RUAG began production at a Florida facility which will ultimately support over 600 jobs.
All told, Swiss firms have plowed $224 billion into the United States, making the small alpine country our seventh largest source of foreign direct investment. These companies support over 460,000 American jobs which pay an average salary of $103,000.
Meanwhile, U.S. firms have returned the favor by investing $155 billion in Switzerland.
The Swiss immigrant Albert Gallatin (1761-1849), who became Secretary of the United States Treasury and served under presidents Thomas Jefferson and James Madison, would no doubt be proud of the current state of Swiss-American trade relations. Gallatin brought fiscal discipline to the nascent United States and is honored with a prominent statue in front of the Treasury building in Washington, D.C. The inscription reads simply “Genius of Finance.”
President Trump has targeted several countries for their allegedly unfair trade practices. But Switzerland isn’t in his crosshairs — and for good reason. Swiss companies and officials work hard to ensure the trade relationship remains fair and balanced. Other countries ought to follow Switzerland’s lead.