GENEVA

The Swiss economy contracted in the third quarter as 39% US tariffs introduced in August – but then slashed to 15% under a new deal announced last week – and a global slowdown hit output across key industrial sectors, according to an initial estimate published Monday by the State Secretariat for Economic Affairs (SECO).

SECO's flash estimate showed real gross domestic product (GDP) fell 0.5% between July and September compared with the previous quarter. In the second quarter, GDP grew by just 0.1%, following 0.7% growth in the first three months of the year, excluding the impact of sporting events.

The secretariat said the Swiss economy was "weighed down by a significant decline in value creation in the chemicals and pharmaceuticals sectors," noting that "industry as a whole has experienced a negative trend." Growth in the services sector was also below average, the office added.

The contraction, which followed the introduction of 39% US tariffs on Swiss goods, is expected to ease pressure on export-dependent sectors as Economy Minister Guy Parmelin on Friday presented a new trade agreement under which tariffs on Swiss exports to the US will fall to 15%.

The tariff reduction provides relief after months of strain on industries including watchmaking, machinery, electrical equipment, and fine chemicals.

John Plassard from bank Cite Gestion, cited by Swissinfo, said the tariff change is "a breath of fresh air" for the watchmaking industry, which has been "strangled since August" by a 39% tariff that caused exports to the US to plummet by more than 50% in September.

He added that machinery, electrical equipment, and fine chemicals are also seeing their margins improve.

SECO, meanwhile, expects GDP growth of 0.9% next year, according to its estimates published in October.