Posted originally on CTH on April 28, 2025 | Sundance
Hat Tip very dear friend of the Treehouse, Zurich Mike.
Switzerland is in a conundrum. More specifically, the Swiss National Bank is stuck betwixt two points that are also playing out in other stable western countries. Exports to the USA account for over ten percent of the Swiss manufacturing base.
The Trump tariffs are putting pressure on Switzerland to drop the value of their currency as an offset to retain competitive pricing. However, simultaneous to the tariffs, the Swiss Franc is being purchased by global investment groups and sovereign foreign countries as a safe harbor due to the stability of the currency, which is driving up the value of the franc.
The Swiss Franc is now at the highest point against the U.S dollar in decades. One franc is worth 1.21 dollars. This makes their exports cost even more. The Swiss government desperately needs to lower the value of their currency. The Swiss central bank has already dropped interest rates to 0.25% and is now contemplating negative interest rates as a result.
SWITZERLAND – […] That is why many are speculating on a reaction from the Swiss National Bank (SNB). SNB Director Martin Schlegel could weaken the currency by selling the Swiss franc against the dollar and euro in order to support the export-oriented economy.
But this could provoke a backlash from Trump if he perceives the SNB’s intervention as currency manipulation. Even during Trump’s first term in office, Switzerland was on the US list of suspected currency manipulators.
[…] Interest rate cuts in the key interest rate are considered a diplomatically safe measure to control the franc. It defines the interest rate at which commercial banks can borrow money from the SNB. “If the SNB is dissatisfied with the strong franc and remains limited in foreign exchange interventions, lower interest rates are the only option,” says Francesco Pesole of Bank ING.
Interest rates have already fallen sharply recently. It was only at the end of March that Schlegel lowered the key interest rate to 0.25 percent. The market currently expects a probability of around 80 percent that the key interest rate will fall to zero at the next meeting in June. Yields on short-term government bonds have already fallen into negative territory in recent days. (read more)
If interest rates go into negative territory, savers will be required to pay the bank for storing their money. “Until 2022, various Swiss banks required their customers to pay negative interest on their accounts.”
Meanwhile in other news from Europe, as the Chinese economy contracts, heavy industrial equipment -once again- becomes useless, the Europeans are worried that China will dump cranes and other industrial equipment into their economy.
BRUSSELS, April 28 (Reuters) – The European Commission said on Monday it had imposed duties of up to 66.7% on imports of Chinese machines that lift construction workers after concluding that the producers were benefiting from unfair subsidies and selling at artificially low prices.
The extra duties on Chinese mobile access equipment (MAE) will range from 20.6% to 66.7%, the Commission said, as it sought to protect domestic producers in the EU market worth more than 1 billion euros ($1.14 billion) per year.
The tariffs are the latest in a series of EU anti-dumping and anti-subsidy duties focused on Chinese imports, including a high-profile investigation into Chinese-built electric vehicles, which culminated last October.
The EU executive, which conducted the investigation, said Chinese MAE producers had benefited from preferential financing, grants, state provision of inputs at below-market rates. (read more)
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Centinel2012 