What Trump and stoplights mean for Switzerland
Analyzing the implications of politics in Germany and the USA
Dear Insider,
It’s been a quiet week…
Not.
Across the Atlantic, America has a new president.
And across the Rhine, Germany has lost its “stoplight”
With such major political changes in the two most important countries in North America and Europe, we take a closer look at what the changes mean…
…for Switzerland.
Enjoy,
Ian
( Did you enjoy the recent Deep Dive on UBS’s “copy job” of Louis Vuitton? Read it here.)
Time for Trump
The world held its breathe as America went to the polls. Now they have to live with the outcome.
While most of Europe shakes its head, the return of “the Donald” isn’t as bad for Switzerland as some might think.
Here’s why…
Big business is back
The US government (and in particular the IRS) have made life miserable for Swiss bankers over the years.
But this obscures one simple fact: American and Swiss businessmen/women like to do big deals together.
In particular the pharma industry and the commodities sector are two areas where Swiss and American interests align very well.
While the Democratic administration of Joe Biden liked to lecture Swiss businesses about imposing sanctions and “stepping up” on defence, the return of Trump will fire up people like Harold Ham (oil-fracking king) and Vis Narasimham (Novartis CEO) for more trans-Atlantic deals.
Independence ideology
At its core, both Switzerland and the USA (especially American conservatives) are deeply independent nations.
As a neutral country for hundreds of years, Switzerland marches to its own drummer. Donald Trump - with his “America first” policies - speaks the same language.
Of course, America likes independent nations that think the way it does. A love for independence has its limits…
But with Trump in the White House, the conservative Swiss parties (SVP and FDP) will be emboldened to hold Switzerland to a strong independent course - and thumb their nose at outside pressure…from Brussels or elsewhere.
The change of politics in Washington could even have a chilling effect on Swiss-EU negotiations for a comprehensive bi-lateral treaty. (See below).
Burdens lifted
Despite brave faces, relations between the US and Switzerland had been strained under Biden.
His ambassador Scott Miller seemed to enjoy lecturing Switzerland about their “duties” towards European defence and against wealthy Russians.
While the US may continue to push its weight around on various topics, a significant burden has been lifted.
A Republican president with a very conservative agenda will likely leave Switzerland alone - and let business boom.
Not familiar with EAMs?
A huge amount of wealth in Switzerland is in the hands of some very quiet…and influential people: external asset managers
Who are they? Here are some to know…
Stop(lights) and go
Closer to home, another political earthquake may have deeper consequences for Switzerland.
On Thursday, German Federal Chancellor Olaf Scholz (from social party SPD) fired his finance minister Christian Lindner (leader of the liberal Free Democrats) and brought down his government.
The so-called “stoplight” coalition - Socialists (red, Green (green) and Liberals (yellow) is over.
Here’s why this “stop” - together with Trump’s reappearance - may really signal a “go” for Switzerland.
The fog of…
Over 200 years after Carl von Clausewitz’s On War helped coin “the fog of war” phrase - Germany (Europe’s largest economy) is muddling about in a new daze.
Not one that can be blamed on Putin’s war on Ukraine…
GDP is shrinking, immigrants are causing problems and the famous “German trains running on time” is a grim joke.
The uncertainty isn’t good for business.
And especially not for Switzerland, with its precision manufacturing that produces so much for German heavy industry.
Trade between Switzerland and German tops 100 billion CHF per year…
Breaking up the dis-functional, three-way coalition might just bring the clarity that would greatly benefit Switzerland - not to mention Germany itself.
Socially bad
Germany’s left-leaning coalition (ignoring the liberal Free Democrats) put it at odds with Switzerland’s tendencies towards the right.
(Even if the Swiss SP party is parliament’s second-largest group…)
It made for tension.
One area of conflict was the policy on immigrants coming from Italy, through Switzerland to Germany. Another was state backing for industries, in particular the automotive sector.
In the case of the latter, a heavy reliance on the state (in classic socialist fashion) put VW and other car manufacturers in a bind.
When VW announced the closure of 3 factories, the “groan” could be heard all across Switzerland.
It is hoped that a more liberal government in Berlin will be able to ignite the Germany economy again.
Signed, not delivered
Most importantly, Germany is (or was…) the motor of the European Union.
Case in point, the European Commission is lead by Ursual van der Leyen - a German.
As Switzerland and the EU come down to the wire on negotiations for a new, comprehensive bi-lateral agreement, the collapse of German government could re-install a CDU chancellor (Friedrich Merz) - from the same political family of van der Leyen.
Would this be good or bad for Switzerland?
On the one hand - a weakened Germany might make EU negotiators less confident and somewhat distracted.
But like a wounded animal backed into a corner, it might as well dig in its heels and stick to its demands vis-a-vis their Swiss counterparts.
On immigration policy, however, CDU and the liberals are likely to be more restrictive.
On this point at least, they may see more eye-to-eye with Bern.
Lessons old and new
What can be learned from the past week’s events? And how do they apply to Switzerland?
In short:
Disruption is in the air - Trump rolls into office on the back of Elon Musk and his desire to disrupt US policy and federal government laziness. Switzerland usually avoids “disruption” - but when everything gets shuffled, it pays to be pragmatic amid the chaos.
“Me first” isn’t bad… - Switzerland’s focus on its own interest above all else, albeit in a harmless way, is now in vogue. Citizens matter. Discontent should be heard. Referendums aren’t so crazy.
Socialism is failing…- The left is on the back foot and in both the US and Germany it is because socialists can’t fix problems - period. SP in Switzerland isn’t so helpless - but perhaps only because they are not fully in control.
Dance partners - Independence is great - but economic realities are still…real. When doing the tango with a top trading partner or a global superpower, it takes two…and the dance does not come to a halt “just because the stoplight changes.” Switzerland must keep on…as always.
A chart is worth…
How much is enough? The chart above shows the percentages of working men (green) and women (orange) according to their monthly net salary.
The Bonus
⚠️ You are warned - According to news stats from Federal Office of Cyber Security (FOCS), the agency issues a cyber security warning on average every 8 min and 30 seconds. (Link)
🪟 Window shut - Despite great expectations for a strong IPO pipeline in Switzerland, the window for new exchange issuances has closed with significant disappointment. Only 1 took place before the end of October. (Link)
🏭 One more down - Yet another Swiss textile firm is closing its doors - Schoeller Textil in St. Gallen will cease operations, citing a strong franc and poor demand internationally. (Link)
🪙 Fill your gaps - The Swiss parliament has decided that beginning in 2025, citizens will be able to “back pay” into their 3rd pillar private retirement accounts. But only going back 10 years… (Link)
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