Swiss exporters look to China as new trade deal nears

99.8% of Swiss exports to China could eventually become duty free, giving exporters a significant opening as trade conditions deteriorate elsewhere. Economy Minister Guy Parmelin and Chinese Commerce Minister Wang Wentao announced the conclusion of negotiations in Bern on Thursday and signed a memorandum of understanding.

The revised agreement still requires formal signature and approval by the Swiss Parliament. The government expects the deal to save Swiss companies around CHF 244 million annually. Roughly three quarters of the new tariff concessions would apply when the agreement takes effect. Other reductions, including those covering cheese, would be introduced over as long as ten years.

The pact updates the free trade agreement that Switzerland became the first European country to sign with China. That agreement has operated since 2014, helping establish China as Switzerland's third largest trading partner. Its tariff coverage, however, remained narrow. Only 53.8% of Swiss goods exports currently enter China without customs duties.

The timing matters for companies in watches, pharmaceuticals, food and coffee. Washington has announced tariffs of up to 12.5% on some Swiss goods, while Brussels has raised duties on Swiss steel. The China deal offers exporters another route to market, although it also places renewed focus on how far Switzerland should deepen its commercial exposure to Beijing.

Swiss watches could move from near exclusion to full tariff access under the revised terms. The watch industry has been one of the clearest beneficiaries in prospect, since only about 1% of Swiss timepieces currently avoid Chinese duties. The Federation of the Swiss Watch Industry estimates that tariffs cost companies approximately CHF 100 million a year.

Lower duties would improve the price position of manufacturers in the Chinese market, but tariff relief will not restore demand by itself. Swiss watch exports to China fell by one third between the start of 2024 and the end of 2025. Sales were down another 7.1% in the first half of this year, according to the industry federation.

Philippe Pegorar, its chief economist, linked the weakness to the deterioration of China's financial environment and fiscal tightening affecting wealthy consumers. He also pointed to difficulties in the property sector, which accounts for a significant share of Chinese economic output.

Pharmaceutical companies could gain from wider concessions, while cheese and coffee producers would receive improved access under longer or more complicated schedules. The agreement creates room for Swiss brands to compete on price. It does not guarantee that Chinese consumers will return to previous spending patterns.

Tariff cuts will not remove the regulatory barriers that Swiss companies face in China. Firms still need to navigate product registration, certification, local testing rules, customs procedures and licensing requirements. Guillaume Joyet, executive director of the Swiss China Chamber of Commerce in Beijing, described these requirements as a major source of friction for exporters.

Industry associations have said they need more detail before judging whether the upgraded agreement makes meaningful progress on those technical obstacles. A product can qualify for preferential treatment and still face lengthy approval processes, differing standards or inconsistent implementation by local authorities.

This matters especially for smaller Swiss manufacturers. Large pharmaceutical and watch groups can maintain compliance teams in China. A specialist producer in the Jura, Valais or St Gallen may have fewer resources to interpret rules, secure permits and manage changing documentation. The tariff calculation is only one part of the final cost of selling abroad.

The government says the agreement will also extend access for products that received only partial relief under the existing pact. Businesses will now assess the practical terms, including rules of origin, customs administration and the timetable for each product category. Those details will determine whether the headline saving of CHF 244 million a year translates into wider participation by Swiss exporters.

The agreement arrives as Switzerland's traditional trading relationships become less predictable. The United States has announced tariffs of up to 12.5% on some Swiss goods, a level higher than that applied to many other European countries. In the European Union, duties on Swiss steel have increased, while Swiss participation in the EU electricity market remains tied to negotiations over a new framework for bilateral relations.

That pressure has encouraged Swiss firms to diversify. Economiesuisse said the country needs broad based trade relations with every major export market, arguing that wider commercial links reduce one sided dependencies. China offers scale and a formal framework, but it also brings exposure to a slowing economy, state intervention and geopolitical tensions.

The Swiss China agreement therefore carries both commercial and diplomatic weight. The United States has imposed technology restrictions affecting Chinese access to advanced products, while Washington has also signalled concern about closer economic ties between European countries and Beijing. Switzerland's policy has been to preserve room for trade while managing its political relationships.

China has sought to present itself as a defender of multilateral trade, including at the World Economic Forum in Davos. Swiss companies will judge that position through market access, payment security and predictable regulation. Government officials must weigh those business gains against the risks of concentrating more export activity in one difficult market.

Parliament will decide whether the tariff breakthrough becomes Swiss trade policy. Earlier committee discussions were broadly favourable, although labour rights and environmental safeguards remained contentious. The revised agreement includes commitments to implement International Labour Organization conventions and uphold fundamental labour rights. The economics ministry says China has accepted such provisions for the first time in one of its free trade agreements.

The environmental chapter covers cleaner energy and the circular economy. Switzerland describes it as one of the most ambitious environmental sections included by either country in a trade agreement. Parliament will examine whether those commitments include adequate monitoring and enforcement, alongside the commercial terms.

The formal agreement is expected to be signed this year. Once approved, implementation will unfold unevenly. Most new tariff exemptions would arrive early, but cheese concessions could take a decade. Companies will also need to overcome certification and licensing barriers that sit outside the customs schedule.

For Switzerland, the deal offers a concrete export benefit at a time of tariff uncertainty in the United States and the European Union. Its success will be measured by more than the headline percentage. Watch sales, pharmaceutical shipments, food exports and the ability of smaller firms to meet Chinese requirements will show whether the agreement produces durable commercial growth.