Switzerland’s manufacturing downturn is deepening as firms weigh job cuts and moving production abroad in response to US tariffs, increasing pressure on the government to secure improved trade agreements.

According to industry association Swissmem, more than 30% of companies intend to relocate operations to the European Union due to the tariffs imposed by US President Donald Trump. Many others are also considering reduced working hours or staff reductions.

The 39% US tariff on Switzerland is the steepest applied to any developed country, creating a significant risk for both businesses and the wider economy. In response, Swiss authorities are seeking to resolve the issue with a new proposal to Washington, aiming to secure an agreement by October, Bloomberg reports.

US Treasury Secretary Scott Bessent has signalled that the US hopes to conclude its pending trade negotiations with various countries by that time.

“We are currently in a dangerous downward spiral, and the knock-on effect is being accentuated by the US tariffs,” said Swissmem director Stefan Brupbacher. “This is a dramatic situation for the affected companies, employees and regions.”

Although economists continue to project growth for Switzerland’s economy, companies and business leaders have adopted a more guarded outlook, with several already rolling out contingency measures.

Beyond the tariffs, Swiss exporters are also grappling with a strong Franc, which has appreciated more than 12% against the US Dollar in 2025, making it one of the strongest performers relative to the greenback.

Switzerland’s economy relies heavily on exports and consistently posts a sizable goods trade surplus with other countries. A key driver of this is its pharmaceutical industry, led by major players Roche Holding and Novartis. Earlier in August, the two companies held talks with the Swiss government regarding the challenges at hand.

Furthermore, Swissmem, the association representing Switzerland’s export-focused mechanical and electrical engineering sectors, has urged the government to take every possible step to ease business costs.

It also underscored the importance of strengthening trade relations with the European Union, which already absorbs nearly half of Swiss exports. The organisation speaks for more than 1,000 companies, ranging from small and medium-sized enterprises to major corporations.

In its latest report, Swissmem said manufacturing orders fell 13% in the second quarter compared with the previous three months, while overall sales dropped for the ninth quarter in a row. The group warned that the downturn is likely to intensify in the months ahead.