UBS Warns High U.S. Tariffs Could Drag on Economy

UBS has warned that sustained high U.S. tariffs could significantly dampen Switzerland’s economic outlook. According to the bank’s Chief Investment Office Global Wealth Management, tariffs are already slowing exports and risk shaving up to 0.4 percentage points off GDP growth. For households, businesses, and the banking sector, the implications go beyond trade—they could reshape credit demand, labor markets, and the long-term stability of the Swiss economy.

What Tariffs Mean for Growth

In the second quarter of 2025, Swiss GDP expanded by just 0.1% compared with the previous quarter, when adjusted for sporting events. The slowdown was largely driven by weaker exports, particularly in the pharmaceutical industry. While U.S. tariffs spurred a temporary surge in shipments earlier this year as firms front-loaded deliveries, those effects have now faded.

UBS economists forecast overall GDP growth of 1.3% for 2025, an improvement on earlier estimates, thanks to strong domestic consumption. Household spending rose 0.3% in Q2, while government spending increased 0.9%. Even so, the bank cautions that if tariffs remain as high as 39%, growth could fall closer to 0.9% in 2026.

How Households and Businesses Are Affected

For households, the immediate impact of tariffs is indirect but real. Slower export growth can weigh on jobs in manufacturing and trade-related sectors, creating uncertainty about future income. Families considering mortgages, loans, or major purchases may hesitate if job security feels less certain. At the same time, resilient consumer demand in services—ranging from hospitality to digital banking—has helped cushion the slowdown, showing that domestic confidence still supports growth.

For businesses, especially exporters, tariffs raise costs and squeeze margins. Many pharmaceutical companies are now considering moving production to the U.S. to avoid tariffs, which would erode Switzerland’s trade surplus over the medium term. Smaller firms, without such flexibility, face tighter credit conditions as banks reassess risk in a weaker trade environment.

What It Means for Banks

Swiss banks are watching these developments closely. Weaker exports and the threat of job losses could reduce demand for loans and mortgages, while putting pressure on credit quality. At the same time, higher tariffs could limit deposit growth from corporate clients as their revenues decline.

However, banks also see opportunities. With households still spending and relying more on digital banking tools, checking accounts, savings products, and digital payments remain steady sources of growth. For UBS, now the country’s dominant lender following its takeover of Credit Suisse, the challenge will be balancing traditional lending with expanding digital services while managing risks from a slower economy.

Broader Economic Outlook

Looking ahead, UBS expects the Swiss pharmaceutical industry to gradually build production capacity in the U.S., limiting the long-term drag from tariffs but reshaping Switzerland’s export model. In the near term, government support measures such as short-time work programs should help stabilize employment and prevent a sharp rise in unemployment.

Closing Insight

UBS’s warning highlights how international trade disputes ripple through the real economy, affecting everything from jobs to checking accounts and loans. For households, the lesson is that global policies can directly influence local financial stability. For banks, it reinforces the importance of prudent credit management in uncertain times. If tariffs persist, expect tighter regulation, a greater focus on digital banking innovation, and continued reliance on domestic consumption to sustain growth.