Free Trade, Anyone?

The study analyses the potential economic impact of different trade policy scenarios between Switzerland and the USA. After the European Union, the USA is Switzerland's most important trading partner, with high medium-term growth prospects. The KITE model is used to analyse six scenarios ranging from full trade liberalisation to an escalation of trade tensions. The results show that a comprehensive free trade agreement could increase Switzerland's real GDP by up to 1.3 percent in the long run, while a trade war would lead to a decline of 0.4 percent, with industries being affected very differently by each scenario. Export-oriented sectors such as pharmaceuticals, machinery and financial services would particularly benefit from a deeper partnership. The analysis also shows that all regions of Switzerland would benefit from trade liberalisation, although trade gains are unevenly distributed across regions. The study underlines the importance of stable trade relations and recommends that Switzerland adopt a proactive trade strategy to deepen economic ties with the USA.