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Trump’s tariffs are forcing the home of Davos to consider appealing to the U.S. or forming closer ties with the EU

President Trump’s tariff policies have reordered global supply chains, redrawn investment maps and tested old alliances. In Switzerland, they have also spurred an uneasy audit of its role in the world.

Switzerland thrived as an honest broker and diplomatic powerhouse for centuries. The War of the Spanish Succession between France and the Holy Roman Empire finally ended in 1714 with a treaty signed in the small town of Baden. In 1872, an arbitration court in Geneva ordered the U.K. to pay the U.S. compensation for providing war ships to the Confederacy during the Civil War. It later played a role in setting navigation rights in the Black Sea and resolving conflicts from Indochina to Algeria.

But many in the Alpine country—which the U.S. recently slapped with one of the highest tariff rates in the world—are now questioning whether its centuries-old model of neutrality and exceptionalism is still fit for purpose in a transactional, power-driven world. In this new world, Switzerland, the home of Davos and multilateral organizations such as the World Trade Organization and the International Committee for the Red Cross, is a symbol of a globalism now out of fashion in many capitals.

The danger, Swiss officials, executives and observers say, is that this go-it-alone model might now be a liability for a nation of just nine million people.

Instead, Switzerland’s long history of democracy and peace could leave it with little more than the metaphorical cuckoo clock, to paraphrase Orson Welles’ Harry Lime character in “The Third Man,” and no more sway in the trade war than developing states such as Laos, Myanmar and Syria. As a result, calls are growing to forge a closer relationship with the European Union, which managed to secure a more favorable levy with the Trump administration. Some Swiss companies, meanwhile, are drawing up plans to relocate production to some of its bigger neighbors.

“Switzerland can no longer navigate between the blocs as before,” said Jon Pult, lawmaker and vice president of the Social Democratic Party of Switzerland. “That’s over, we no longer live in that world.”

Adrian Steiner, chief executive of coffee-machines maker Thermoplan that supplies Starbucks and McDonald’s, said Switzerland’s success came because “our system worked quite well in the old-rules world.”

“But we have a new type of politics now where this is all gone,” he said. “We are too small to play in the big boys’ game. In there it doesn’t matter so much if you are neutral or not.”

The imposition of a 39% levy last week—despite months of negotiations—stunned Switzerland, which counts the U.S. as its biggest individual export market for its wares including watches, chocolate, pharmaceuticals and machine tools. Thursday’s front page of the Blick daily newspaper was all black featuring 39% in a large white font with the inscription “A Black day for our country.”

The main reason for the high tariff rate is that Switzerland has one of the largest trade deficits in goods with the U.S., at $48 billion this year through June. The deficit has skyrocketed lately because of a rise in pharmaceutical and gold imports looking to get to the U.S. ahead of anticipated tariffs.

Politicians and analysts have floated various ideas to appease Trump—from buying more U.S. beef, liquefied natural gas and F-35 jet fighters, to relocating the headquarters of FIFA, soccer’s global governing body, from Zurich to Miami. But after a failed last-minute mission in Washington, D.C., last week to halt the tariffs, Switzerland’s President Karin Keller-Sutter said quick solutions weren’t forthcoming.

“We can’t say how long this situation will last,” Keller-Sutter said, adding that her negotiators will continue talks with the U.S. “Ultimately, however, it’s in the hands of the American president.”

That is a problem for Swiss companies who say they can’t compete when neighboring Germany and France pay 15%. Industry association Swissmem called it a “horror scenario” and said the levies could cost Switzerland tens of thousands of jobs.

Interprofession du Gruyère, a trade body representing 1,600 dairy farms making the eponymous cheese, said it expects the U.S. business—which eats up to a third of Switzerland’s Gruyère exports—to partly collapse. Medical-device maker Ypsomed said it would relocate some of its U.S-bound production to its German site and accelerate plans to establish a U.S. production facility.

Steiner said Thermoplan, too, was assessing relocating production because “we either face a loss of business or we move the business.”

The tariffs crisis isn’t the first to chip away at Swiss identity.

After 2008, the U.S. enacted laws requiring Swiss banks to transfer information about American clients to the Internal Revenue Service, a hammer blow to its banking secrecy dating back to the 1700s when Geneva made it a civil offense to divulge the banking details of an aristocrat. A slew of banking scandals, including the collapse of Credit Suisse in 2023, has rocked the country in recent years.

Switzerland’s 200-year-old policy of neutrality has been also difficult to defend during Russia’s war on Ukraine. Pressured by its larger neighbors and the Biden administration, Switzerland joined EU sanctions against Moscow.

“It’s a myth that neutrality protects you from all security threats because neutrality is only worth something if the others accept you to be neutral,” said Stefanie Walter, professor of international relations and political economy at the University of Zurich.

Trump’s levies come as the Swiss are already debating whether to forge closer EU ties. Switzerland isn’t an EU member—and few think it ever will be—but it is deeply integrated through a web of bilateral agreements. A package of deals, which expand Switzerland’s access to the EU’s single market, will be subject to a referendum possibly next year.

The campaign is already inflamed. Marcel Dettling, president of the right-wing Swiss People’s Party which opposes closer EU ties, recently posted a video declaring the choice to be between “freedom and serfdom.” In it, he sets the pages of the EU agreement on fire and uses a medieval halberd to roast a sausage over the flames.

Analysts, however, say the tariff drama could boost the pro-EU campaign. “Suddenly that deal looks much more, much better than it looked just two weeks ago” Walter said.

Hans-Peter Portmann, lawmaker of the Free Democratic Party of Switzerland, said that while Switzerland can’t become an EU member and sacrifice its direct democracy model, it has to realign its geopolitical priorities.

“A small country like Switzerland is at risk of being squashed,” he said. “The tariff dispute with the U.S. opened the eyes of many in Switzerland.”