Impact of US custom policies on the chemical & pharmaceutical industry

The USA is the most important export market for the Swiss chemical, pharmaceutical and life sciences industries. However, the tariff increases that have already been implemented or threatened could increase production costs and prices and disrupt supply chains, which would jeopardise the availability of essential medicines. Protectionist measures and possible countermeasures by the EU could jeopardise trade and political relations. The impact on Switzerland as a production location is currently still unclear.

The USA is the most important export destination for our members of the chemical and pharmaceutical industry. In terms of both exports (63.9 per cent of total exports) to the USA and imports (42.9 per cent of total imports) from the USA, chemical-pharmaceutical industry products rank first in the trade in goods. In 2024, pharmaceutical products, vitamins and diagnostics accounted for 94.2 per cent of our industries' total exports to the USA, while organic raw and basic materials accounted for 2.4 per cent and crop protection products for 1.9 per cent. Around 94 per cent of goods exported to the USA can be imported duty-free.

Supply of medicines jeopardised by tariff increases

The tariff increases of 10 per cent (basic tariff) and 31 per cent (reciprocal tariffs) threatened to Switzerland have different effects depending on the type of exported goods (e.g. unique selling proposition, supply relevance) and the business model of the companies. Tariffs on pharmaceuticals, their active ingredients and raw materials inevitably lead to rising production costs and thus jeopardise the availability of essential medicines. In addition, customs duties generally lead to higher prices for the recipient of the goods.

An interruption to established supply chains could cause supply bottlenecks, particularly for critical medicines. The coronavirus pandemic has clearly demonstrated that functioning supply chains are essential to ensure the supply of vital medicines. The US pharmaceutical industry is heavily dependent on global suppliers, particularly highly specialised companies in Switzerland and the EU. Protectionist measures of this kind could make it considerably more difficult and expensive for patients to access necessary therapies.

Effects on prices, contracts and competitiveness

In view of the level of tariffs already implemented and threatened, companies may feel compelled to consider price increases. However, price increases for affected products are not always possible due to administered prices. This could lead to price increases in negotiations with international customers, which of course are not always accepted. Companies that have long-term contracts with export partners may have to renegotiate existing agreements to cover the new costs. In the case of products with a unique selling point, these will certainly be easier to realise than for products with numerous suppliers and competitors.

Switzerland is a key player in the pharmaceutical industry, and trade barriers could disrupt existing supply chains and increase production costs. This would not only affect the industry's competitiveness, but would also have a negative impact on research, development and innovation. As a result, patients will suffer the most.

Effects on Switzerland as a production location

The USA is the most important pharmaceutical market. Some companies have recently announced investments in the USA. The extent to which this will affect Switzerland as a production location cannot be estimated at present. No effects are expected in the short term, but in the long term it depends on which products are to be produced for which markets in the USA.

Switzerland in the midst of protectionist measures

The tariff increases on products are aimed at individual countries - some affected countries have already announced or implemented corresponding countermeasures in the form of counter-tariffs or export restrictions (e.g. EU) (e.g. China). Depending on the design of these measures, this will lead to a significant disruption of established supply chains. An escalation that could lead to a trade war that would affect not only companies in Switzerland, but also subsidiaries and customers in countries that supply the US market, must be prevented. It must be ensured that Switzerland is not affected by possible countermeasures by the EU. Experience with the EU steel protection measures has shown what impact this can have. Intensive dialogue with the relevant authorities is therefore essential. At the foreign policy level, it must be ensured that Switzerland would be exempt from any countermeasures.

The EU countermeasures must be designed in such a way that Switzerland is excluded from them. Otherwise, there is a risk that the public's approval of the Bilateral Agreements III will be negatively influenced, particularly in view of the upcoming referendum on the Swiss-EU negotiation package. The EU is our most important trading partner: more than 50 per cent of our exports go to the EU, and over three quarters of all chemical-pharmaceutical products come from the EU. Unhindered access to the EU internal market is therefore of central importance.

Politics and administration are challenged

Swiss companies need planning and legal certainty and good framework conditions in order to be able to hold their own in global competition. Factors such as the availability of a well-trained workforce, security of supply with affordable energy, lean regulations and their pragmatic implementation and good connections to all key markets are of central importance.

Switzerland must ensure fiscal predictability, reward innovation in Switzerland and thus make it available quickly, and develop a visionary strategy for good framework conditions in areas with high innovation potential.

The increasing density of regulation and high energy costs in Switzerland are challenges for companies. Accordingly, unnecessary regulations and additional financial burdens for companies must be avoided - proposals that could potentially place an additional burden on Swiss companies must be subjected to critical scrutiny. Technology bans must be avoided in order to maintain Switzerland's position as a leading centre of innovation.

In the view of scienceindustries, industry and politics should take joint measures to secure and strengthen Switzerland's competitiveness and attractiveness as a business location:

•    Politically, trade barriers must be consistently dismantled, no new regulations that burden companies must be introduced and the stability of relations with the EU must be ensured by continuing the Bilateral Agreements III and with important global trading partners. A clear political commitment to open markets and WTO-compliant free trade is crucial.

•    In economic terms, we recommend that companies improve the diversification of sales and procurement markets and the resilience of their supply chains in a targeted manner and focus more on innovation, digitalisation and efficiency improvements.

scienceindustries is therefore committed to ensuring that Switzerland continues to stand firmly for open markets, stable international trade rules and constructive dialogue at all levels.