Evelyn Reynolds

The Friday release of September’s consumer price index report is pretty much the only game in town this month for a Wall Street that is hungry for data, raising the chances for it to be a market-moving event.
The report, which was supposed to be released Oct. 15, will be the last significant economic reading before the Fed’s policy meeting that concludes Wednesday.
“Because we haven’t gotten any government data in the recent past, I think all of the market’s focus and all of the market’s attention is going to be directed onto this one report,” said Troy Ludtka, senior U.S. economist at SMBC Nikko Securities.

A shopper looks at produce at a grocery store in West Milton, Ohio, US, on Tuesday, Oct. 21, 2025.
Kyle Grillot | Bloomberg | Getty Images

The Friday release of September’s consumer price index report is pretty much the only game in town this month for a Wall Street that is hungry for data, raising the chances for it to be a market-moving event.
While the actual numbers are expecting to land about where they’ve been in recent months, the dearth of official economic reports, thanks to the government shutdown, means even a slight deviation could cause an outsized impact.

“Because we haven’t gotten any government data in the recent past, I think all of the market’s focus and all of the market’s attention is going to be directed onto this one report,” said Troy Ludtka, senior U.S. economist at SMBC Nikko Securities. “This is going to be the report to end all reports.”
As far as the Wall Street consensus goes, though, the CPI release from the Bureau of Labor Statistics looks to be more of the same.
Economists surveyed by Dow Jones expect the monthly all-items reading to increase by 0.4%, the same as a month ago, putting the 12-month inflation rate at 3.1%, or 0.2 percentage point higher than the August level. Excluding food and energy, core CPI is projected to show a 0.3% monthly increase and a 3.1% annual level, both the same as in August. The yearly rate would be the highest since January.

What the Street will be looking for is any deviation in the readings showing that inflation is running hotter or colder than anticipated. The focus also will be on the details showing what impact President Donald Trump’s tariffs are having on prices.
The report, which was supposed to be released Oct. 15, will be the last significant economic reading before the Fed’s policy meeting that concludes Wednesday. The BLS called workers back because it uses CPI as a benchmark for Social Security cost of living adjustments.

Lack of clarity

Goldman Sachs economists expect little change on auto prices, a boost on car insurance and a decline in airfare. On the tariff issue, the firm said in a note that it expects “upward pressure” on categories such as communication, household furnishings and recreation, but an addition of just 0.07 percentage point to the core inflation figure.
However, data in general is a black box with so much of the government shut down, raising some questions over the reliability of the CPI.
“We don’t have full clear clarity with the lack of important data points that the market depends on due to the government shutdown,” said Vishal Khanduja, head of broad markets fixed income at Morgan Stanley Investment Management. “So that adds to the uncertainty a little bit more.”
Indeed, investors have been on tenterhooks lately, pushing major stock market averages to around record territory despite continued fluctuation in day-to-day moves.
Geopolitical uncertainty is at the root of concerns, with the ever-shifting tariff landscape injecting worry that higher prices could slow what has been an otherwise surprisingly strong pace of economic growth. The CPI report, despite concerns about how clean the data will be due to shutdown-related disruptions, should help answer at least some of those questions.
That applies both to markets and the Federal Reserve, which holds a policy meeting next week at which officials are widely expected to approve another quarter percentage point interest rate cut.
“In terms of market impact, it would take a meaningful surprise to the upside for the market to change its mind about an additional interest rate cut,” said Julien Lafargue, chief market strategist at Barclays Private Bank.
Outside of the trade war’s frequent gyrations, markets have been boosted by another strong earnings season. Prior to the lockdown, economic data also had shown a surprisingly resilient economy, with gross domestic product tracking close to 4% for the third quarter, according to the Atlanta Fed.
While it would take something of consequent to shake that narrative, a surprise from CPI might just be the ticket.
“I would expect volatility if the number comes in higher than expected,” said Stephanie Link, chief investment strategist at Hightower Advisors. “I would view that as a buying opportunity as the economy is strong, the Fed is beginning a cutting cycle, EPS are growing double digits and the fourth quarter is seasonally the strongest quarter of the year.” More

Americans are increasingly diverging in their spending, with wealthier shoppers flexing their purchasing power while lower-income customers start to pull back.
Sectors like food, automotives and airlines are signaling a “K-shaped economy.”
The Labor Department is scheduled to release a consumer price index report on Friday, delayed by the government shutdown.

Jasondoiy | E+ | Getty Images

Amid recession fears, a government shutdown and tariff uncertainty, consumers are increasingly diverging in their spending.
Wealthier Americans are engaging their purchasing power, while lower-income Americans are starting to pull back — commonly described as a “K-shaped” economy. Friday’s consumer price index report could shed more light on the pressures facing large swaths of the country.

The CPI report, which measures price changes across a range of goods and services, was delayed due to the government shutdown, originally scheduled to be released nine days prior. Though the report will not include any data related to the shutdown, it will offer a read on the state of inflation ahead of a Nov. 1 deadline for the Social Security Administration to calculate annual cost-of-living adjustments.
Lower- and middle-income consumers have been hit hardest by rising costs on daily essentials like groceries and gas. Meanwhile, wealthier investors have benefited from stock market rallies and rising home values. Recent data from JPMorgan’s Cost of Living Survey found that income bracket was a large factor in Americans’ varying views of the current state of the economy.
Here’s where bifurcation is beginning to take hold:

Food and beverage

Coca-Cola, often viewed as a bellwether for the financial health of consumer, has been seeing the divergence across its business.
Pricier products that are more exposed to high-income consumers, like Topo Chico sparkling water and Fairlife protein shakes, are fueling the company’s sales growth, CEO James Quincey told CNBC’s “Squawk on the Street” Tuesday. 

At the same time, Coke is seeing higher demand at both dollar stores that cater to low-income consumers looking for deals and higher-end outlets that skew toward wealthier consumers, like fast-casual restaurants and amusement parks.
McDonald’s CEO Chris Kempczinski told CNBC’s “Squawk Box” in early September that the burger chain’s expansion of its value menu was in response to a divided consumer landscape, or what he called a “two-tier economy.”
While Kempczinski said the company is seeing upper-income consumers performing well, its lower- and middle-income diners are “a different story.”
“Traffic for lower-income consumers is down double digits, and it’s because people are either choosing to skip a meal… or they’re choosing to just eat at home,” he said last month.
A similar dynamic is playing out at Chipotle, according to Chief Financial Officer Adam Rymer.
“There are certain cohorts of the consumer, definitely on the lower-income side, that are feeling pressure right now. That’s something that we’ll have to take into consideration when looking at price going forward,” Rymer told Reuters in July.

Autos and airfare

Last month, the average price for a new vehicle surpassed $50,000 for the first time ever, according to Cox Automotive’s Kelley Blue Book.
The record pricing comes as auto loan defaults and repossessions are on the rise, particularly for those with FICO scores below 620.
“Today’s auto market is being driven by wealthier households who have access to capital, good loan rates and are propping up the higher end of the market,” said Cox Automotive executive analyst Erin Keating in a statement last week.
And though airlines have been piloting premium offerings for years, the higher-cost tickets have gained momentum in recent months.
Delta Air Lines said earlier this month that revenue from its premium offerings is expected to surpass the coach cabin next year, with CEO Ed Bastian saying he’s not seeing any signs of slowdown in the roomier, more expensive seats.

Hospitality

Still, though there are signs of a “K-shaped” economy, some argue it’s not here to stay.
Hilton CEO Christopher Nassetta told CNBC last month that he’s seeing a bifurcation, but he doesn’t expect that pattern to last much longer, partly because he sees inflation and interest rates decreasing.
“My own belief is that as we look into the fourth quarter and particularly into next year, we’re going to see a very big shift in those dynamics, meaning, I don’t think you’re going to continue to have this bifurcation,” Nassetta said. “That’s not to say I think the high end is going to get worse or bad, I just think the middle and the low end is going to move up.”
On Wednesday, the hotel chain reported a drop in revenue for affordable brands like Hampton by Hilton and Homewood Suites by Hilton.
Meanwhile, Nassetta told investors on an earnings call that revenue from luxury offerings performed exceedingly well and remains a focus for Hilton moving forward.
— CNBC’s Amelia Lucas, Michael Wayland, Alex Harring, Luke Fountain and Leslie Josephs contributed to this report. More

India and the U.S. are close to reaching a trade deal, according to Indian media outlet Mint.
Washington may cut its tariffs on Indian exports to 15%-16% from the current 50%, the report said.
New Delhi may agree to gradually wind down its imports of Russian oil, it added.

U.S. President Donald Trump meets with Indian Prime Minister Narendra Modi in the Oval Office of the White House in Washington, DC, on Feb. 13, 2025.
Jim Watson | Afp | Getty Images

The U.S. could substantially slash tariffs on Indian exports as the two countries near a trade deal that could see New Delhi cutting oil purchases from Russia, Indian media outlet Mint reported Wednesday.
As part of the trade deal, Washington could slash tariffs on Indian exports to 15%-16% from the current 50%, Mint reported citing three unnamed sources aware of the matter.

India is also considering raising its import quota for non-genetically modified corn from the U.S. — currently 0.5 million tonnes annually — even with a import duty of 15%, while pushing for a mechanism under which both sides can revisit tariffs and market access over time, the report said.
On Tuesday, U.S. President Donald Trump said he had received assurance from Indian Prime Minister Narendra Modi in a phone call that New Delhi would scale back purchases of Russian oil.
“He’s not going to buy much oil from Russia. He wants to see that war end as much as I do. He wants to see the war end with Russia, Ukraine, and as you know, they’re not going to be buying too much oil,” Trump told reporters abroad Air Force One, while threatening that New Delhi would keep paying “massive” tariffs if it did not do so.
In a post on X on Wednesday morning local time, Modi confirmed the phone call with Trump, adding that he hoped the two countries continue to “stand united against terrorism in all its forms,” without mentioning India’s stance on Russian oil.
Trump last week also said that Modi in a call had agreed to cut Russian oil purchases. India’s foreign ministry spokesperson said the following day that he was not aware of any call between Trump and Modi.

On the question of cutting oil imports from Russia, the spokesperson said Thursday, “India is a significant importer of oil and gas. It has been our consistent priority to safeguard the interests of the Indian consumer in a volatile energy scenario. Our import policies are guided entirely by this objective.”

Strategic flashpoint

The U.S.-India relations further soured when Modi met with Russian President Vladimir Putin and Chinese President Xi Jinping in Beijing last month, in a move seen as a signal to Trump of India’s willingness to boost rather than cut ties with Moscow.
India has become the world’s second largest buyer of Russian crude, trailing China, since the start of the war in Ukraine in 2022, importing 1.6 million barrels per day in the first half of this year, up from 50,000 bpd in 2020, according to the U.S. Energy Information Administration.
In recent weeks, Trump has softened his rhetoric, expressing optimism about the ongoing negotiations and reiterating on Tuesday that Modi was a “great friend.”
The finalization of the trade agreement will likely be communicated to Trump and Modi at the ASEAN summit later this month, though neither Trump nor Modi has officially confirmed their attendance for the event, Mint reported.
“The broad contours of the agreement are in place, but sensitive areas such as agriculture and energy need political clearance before the deal can be announced,” the report said.
India’s Ministry of Commerce and Industry, the U.S. Department of Commerce and the U.S. Trade Representative did not immediately respond to CNBC’s requests for comments.
Data from government-backed India Brand Equity Foundation shows, bilateral trade between New Delhi and Washington reached a record $132.2 billion in fiscal year ending March 2025, up by more than 10% from the previous year.
India’s exports to the U.S. jumped 11.6% to $86.51 billion, while imports from the country rose 8% to $45.69 billion.

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The September consumer price index report coming out Friday will command full attention from financial markets, even as some investors will view the data with a skeptical eye.
Though still considered part of the “gold standard” U.S. economic data collection apparatus, the Bureau of Labor Statistics has been criticized for its analog approach.
Despite questions over the data, economists aren’t looking for anything dramatic from the actual numbers.

Customers check out at a supermarket on August 12, 2025 in New York City.
Liao Pan | China News Service | Getty Images

The September consumer price index report coming out Friday will command full attention from financial markets, even as some investors will view the data with a skeptical eye.
With the Bureau of Labor Statistics already under scrutiny this year for its broad menu of data releases, the government shutdown gripping Washington, D.C., will only raise concerns from parts of Wall Street about whether the inflation reading will present a full picture.

“Skeptics like me are going to be focused on how clean is this data,” said Vishal Khanduja, head of broad markets fixed income at Morgan Stanley Investment Management. “What were the accommodations made for the lack of full personnel staff showing up? What adjustments were made before the data got reported?”
Indeed, the BLS this year has faced a host of questions over its data collection methods. President Donald Trump in August, furious over huge downward revisions in nonfarm payrolls data, sacked former BLS Commissioner Erika McEntarfer.

Though still considered part of the “gold standard” U.S. economic data collection apparatus, the BLS has also been criticized for its decidedly analog approach, which includes in-person visits, phone calls and written response forms.
The agency faces the added burden of staffing cuts — even before the shutdown — and has eliminated several cities from its collection efforts. Now, it is putting together a key inflation report with most of the government closed and risks that sample data could be incomplete.
For those reasons, Khanduja thinks investors should be careful with how much emphasis they place on the CPI reading.

“The efficacy and the cleanliness of data — there will definitely be a little bit of a skepticism had from my end, and I’m thinking the market will do the same,” he said.
Muted expectations
Even with the questions over the data, economists aren’t looking for anything dramatic from the actual numbers.
The Dow Jones consensus has the CPI report showing 3.1% annual inflation levels on both the headline, or all-items, gauge as well as the core, which excludes food and energy. Economists see the monthly headline number rising 0.4% and 0.3% for core, right in line with the August gains.
What gives this report an even higher profile is that all other data collections and releases have been suspended during the shutdown. The reason the Labor Department called back BLS staffers is because the CPI report is used to index Social Security cost-of-living adjustments.
So outside of this, there will be no other releases, leaving investors as well as Federal Reserve policymakers flying blind on data. That in itself presents a bevy of problems and another headache for agencies like the BLS.
“As the shutdown appears likely to last into November, it is not clear how the BLS will deal with an unprecedented lack of real-time collections,” Citigroup economist Veronica Clark said in a note. “November data collections are also increasingly likely to be affected. We will be watching for any possible release of guidance on October CPI collections with Friday’s September report.”
In the meantime, the Fed will hold a meeting next week, with markets widely expecting a quarter percentage point reduction in the overnight borrowing rate, likely to be followed by another in December. Fed funds currently stand at 4.00% to 4.25%.
However, there’s considerable uncertainty about what will happen in 2026 and beyond. Trump wants rates aggressively lower, and he’s likely to nominate a candidate next year to succeed Chair Jerome Powell with that philosophy.
With a lack of data certainty, though, formulating policy will be difficult.
“I don’t think we’re going to learn a whole lot from this [CPI] data that we’re not seeing at the moment,” Mike Wilson, chief investment officer at Morgan Stanley, said Tuesday on CNBC. “I think it will give the Fed cover to do what I think they need to do, which is cut rates in a more meaningful way. To me, that [is] the risk, that we don’t get the data that allows the Fed to cut more meaningfully.” More

China has a long dominated the rare earth supply chain.
The U.S. is now seeking a domestic production as trade tit-for-tats continue between the two countries.
The share prices of U.S. listed rare earth stocks soared before the opening bell on Monday.

Shares of U.S.-listed companies related to the rare earth supply chain climbed in premarket trading on Monday as investors continued to weigh the impact of export restrictions on domestic producers.  
Rare earths are minerals that are essential to many aspects of modern life, particularly for the technology sector and the energy transition as they are used in semiconductors and the motors of electric vehicles. 

China has long had a stronghold on the rare earth supply chain, dominating almost 70% of production and nearly half of world’s reserves in 2024, according to the U.S. Geological Survey. China keeps a tight grip on exports, leading other countries like the U.S to pursue its own domestic supply chain in order to reduce its reliance on China.  
U.S-listed companies saw their shares soar around 9:00 a.m ET. MP Materials was last seen 3.6% higher in premarket trading, USA Rare Earth was up 8.6%, and Perpetua Resources, was around 6% higher.
Canadian firms also made gains, with Lithium Americas and Trilogy Metals increasing 6.7% and 5.4%, respectively.
Michael Silver, the CEO and chairman of rare earths distributor American Elements told CNBC’s “Squawk Box” last week that the U.S. has enough heavy rare metals for its military applications, but the supply chain squeeze could impact EVs, lasers, and “quite a lot of commercial technology.” 

Getting mines up and running should be “treated as national priorities,” Silver said, adding that there will likely be government involvement and subsidies.  
Under new rules that were announced earlier this month, foreign companies now need Beijing’s approval to export rare earths and are required to explain what they will be used for.   More

President Donald Trump’s tariffs will cost global businesses upward of $1.2 trillion in 2025, with most of the cost being passed onto consumers, according to a new analysis from S&P Global.
The firm says that just one-third will be borne by companies, with the rest falling on the shoulders of consumers, under conservative estimates.
“While Americans may face a transition period from tariffs upending a broken status quo that has put America Last, the cost of tariffs will ultimately be borne by foreign exporters,” White House spokesman Kush Desai said in a statement.

A shopper walks past shelves of cooking oil for sale at a supermarket in Beijing on October 15, 2025.
Pedro Pardo | Afp | Getty Images

President Donald Trump’s tariffs will cost global businesses upward of $1.2 trillion in 2025, with most of the cost being passed onto consumers, according to a new analysis from S&P Global.
In a white paper released Thursday, the firm said its estimate of additional expenses for companies is probably conservative. The price tag comes from information provided by some 15,000 sell-side analysts across 9,000 companies who contribute to S&P and its proprietary research indexes.

“The sources of this trillion-dollar squeeze are broad. Tariffs and trade barriers act as taxes on supply chains and divert cash to governments; logistics delays and freight costs compound the effect,” author Daniel Sandberg said in the report. “Collectively, these forces represent a systemic transfer of wealth from corporate profits to workers, suppliers, governments, and infrastructure investors.”
Trump in April slapped 10% tariffs on all goods entering the U.S. and listed individual “reciprocal” tariffs for dozens of other countries. Since then, the White House has entered a series of negotiations and agreements while also adding duties on a variety of individual items such as kitchen cabinets, autos and timber.
While administration officials have insisted that exporters will be forced to bear the greater share of the levies, the S&P analysis suggests that is only partly true.
In fact, the firm says that just one-third will be borne by companies, with the rest falling on the shoulders of consumers, under conservative estimates. The figures incorporated a $907 billion hit to covered companies with the remainder to uncovered firms as well as private equity and venture capital.
“With real output declining, consumers are paying more for less, suggesting that this two-thirds share represents a lower bound on their true burden,” said Sandberg, who wrote the report along with Drew Bowers, a senior quantitative analyst at S&P Global.

Political and policy stakes

The size of the tariff hit and the burden of the costs are critical both for the White House looking to sell the duties as essential to restoring a fair trade balance, and to policymakers at the Federal Reserve looking to calibrate the proper balance for monetary policy.
“The President and Administration’s position has always been clear: while Americans may face a transition period from tariffs upending a broken status quo that has put America Last, the cost of tariffs will ultimately be borne by foreign exporters,” White House spokesman Kush Desai said in a statement.
“Companies are already shifting and diversifying their supply chains in response to tariffs, including by onshoring production to the United States,” he added.
Fed officials have been inclined to look through the duties as a one-time hit to prices and not a source of underlying inflationary pressures. The S&P researchers found similar sentiment among analysts.
The consensus looks for a 64 basis point contraction in profit margins this year, fading to 28 basis points for 2026 and then 8 to 10 basis points in 2027-28. A basis point equals 0.01%.
“In effect, 2025 locked in the hit; 2026 and 2027 will test whether the market’s optimism about re-equilibration is warranted,” the authors wrote. “For now, consensus envisions a world where margins eventually recover to pre-tariff trajectories. Whether that faith proves justified will depend on how firms adapt through technology, cost discipline and reshaped global value chains that have defined this cycle.”
The impact also likely will depend on how Trump’s tariff strategy evolves. The White House currently is back in heightened tensions with China over a rare earth dispute and Trump’s intentions to retaliate.
The S&P paper found that Trump’s removal in May of the “de minimis” exception for goods under $800 was “the real inflection point” for how hard tariffs would bite. The exception had allowed low-priced goods to sail under previous tariff barriers, but “had become politically untenable.”
“When the exemption closed, the shock rippled through shipping data, earnings reports, and executive commentary,” Sandberg said.
“In the optimistic scenario that this turbulence is temporary, the Trump administration’s tariff agenda and the resulting supply chain realignments are viewed as transitory frictions, not permanent structural taxes on profitability,” he added. More

The U.S. budget deficit edged lower for 2025 as record-setting tariff collections helped offset what also were unprecedented numbers for payments on the spiraling national debt.
The red ink would have been worse had it not been for a massive surge in customs duties and a September surplus of $198 billion that also set a record for the month.

The statue of former Treasury Secretary Albert Gallatin stands in front of the north wing of the U.S. Treasury Department headquarters building on April 24, 2025, in Washington, DC, U.S.
J. David Ake | Getty Images News | Getty Images

The U.S. budget deficit edged lower for 2025 as record-setting tariff collections helped offset what also were unprecedented numbers for payments on the spiraling national debt, the Treasury Department announced Thursday.
In a year marked by a bruising trade war and high financing costs, the federal government managed to escape with a $1.78 trillion shortfall, some $41 billion, or 2.2%, less than in fiscal 2024.

While that’s still on the high end historically, the red ink would have been still worse had it not been for a massive surge in customs duties and a September surplus of $198 billion that also set a record for the month.
President Donald Trump’s tariffs were a major contributor to tariff collections of $202 billion for the year, representing a 142% surge from 2024. September saw $30 billion in tariff payments, up 295% from the same period a year ago.
Treasury officials estimated Thursday that the dip in the budget shortfall will bring the ratio of deficit to gross domestic product to 5.9%. The measure has not been below 6% since 2022 and generally runs around the 3% area except in times of economic stress.
In an interview last week, Treasury Secretary Scott Bessent, noting Congressional Budget Office estimates that the deficit-to-GDP number would be below 6%, said “we’re on our way” to reducing the debt and deficit burden.
The impact from the deficit was felt in interest paid on the $38 trillion national debt.

Interest on the debt totaled more than $1.2 trillion, also a record and nearly $100 billion higher than the 2024 outlay.
Excluding interest that the Treasury earns on its investments, net interest payments totaled $970 billion, topping defense spending by $57 billion and behind only Social Security, Medicare and health care costs in the national budget.
Trump slapped controversial tariffs on U.S. imports earlier this year despite protests that they would spike inflation and hurt consumers, resulting in lower demand and a hit to economic growth.
While there have been signs of price increases in tariff-sensitive items, the moves have been mostly incremental. Federal Reserve officials say they likely will lower their benchmark interest rate further as they expect any price increases to be temporary. The current fed funds rate stands at 4.00% to 4.25%.
The government’s fiscal year ended in September, with the U.S. collecting $5.2 trillion in revenue over the prior 12 months while spending just over $7 trillion. More

Swiss officials on Thursday downwardly revised their 2026 forecasts for economic growth, blaming the impact of U.S. tariffs.
Switzerland is currently subject to a U.S. tariff rate of 39%, making it one of the hardest hit countries by the Trump administration’s tariffs regime.
Charlotte de Montpellier, senior economist, France and Switzerland at ING, told CNBC that “risks are mounting” for the Swiss economy.

Untere Schleuse wooden bridge in Thun, Switzerland.
Education Images | Universal Images Group | Getty Images

Switzerland’s government on Thursday cut its 2026 economic forecast for the country, citing the Trump administration’s punitive tariffs as a “heavy burden” on its industries.
Officials held their forecast for the Swiss economy to expand by 1.3% this year, but noted that this level of economic growth was “significantly below-average” for the country. For next year, they are now forecasting gross domestic product (GDP) growth will slow to 0.9% – down from a previous 2026 forecast of 1.2% growth.

“Higher U.S. tariffs have further clouded the outlook for the Swiss economy,” officials said in a news release on Thursday.
Switzerland is an export-driven economy, and the U.S. was the top foreign destination for its goods in 2024. Back in August, Switzerland was hit with 39% tariffs on goods sent to the U.S. after a Swiss delegation failed to secure a deal with U.S. officials — one of the highest country-specific rates imposed by the Trump administration.
The country’s biggest exports include watches, pharmaceuticals and precious metals — but the country is also renowned for its luxury goods, chocolate and skincare products. Branded and patented pharma products are newly subject to 100% tariffs upon entry to the U.S., unless their manufacturers have or are building production facilities in America.

Switzerland is in a uniquely difficult position when it comes to tariffs. Here’s why

Swiss officials said in Thursday’s update that under current trade conditions, global demand for Swiss goods and services is expected to rise “only modestly” in the coming quarters.
“The current trade policy environment presents particular challenges for Switzerland,” they said. “The additional tariffs are placing a heavy burden on affected sectors and export-oriented companies, with significant ripple effects expected across the broader economy. Moreover, persistent uncertainty is also dampening economic activity.”

The government also warned that most of America’s other trading partners had been granted lower tariff rates, placing Swiss exporters at a competitive disadvantage in the U.S. market. White House trade policy held significant influence over the future trajectory of Switzerland’s economy, they said.
“If Switzerland were to reach an agreement with the U.S. or if international trade policy were to ease, a more favorable development would be expected,” they said. “Overall, however, downside risks currently dominate.”
Beyond Trump’s tariffs, demand for the Swiss franc is also adding to Switzerland’s economic and diplomatic woes, with the currency – typically seen as a safe haven asset in times of broader volatility – gaining more than 12% this year amid lingering uncertainty. The rising franc has created headwinds for the country’s central bank by putting downward pressure on prices as policymakers battle to avoid disinflation and negative interest rates.

Stock chart icon

U.S. dollar/Swiss franc

Officials said on Thursday that the Swiss franc was continuing to play a role in Switzerland’s economic challenges – and cautioned that a further strengthening of the franc was possible.
“A deterioration in the international environment cannot be ruled out,” they said, noting that risks related to a market correction, global sovereign debt and the geopolitical landscape persisted.
“Should any of these risks materialize, further upward pressure on the Swiss franc would be expected,” they said.

Risks are mounting

Charlotte de Montpellier, senior economist, France and Switzerland at ING, told CNBC on Thursday that “risks for the Swiss economy are mounting.”
“Its exposure to the US market is big, amounting to 4% of GDP,” de Montpellier said in an email. “I estimate a cumulative direct impact of the current increase of US tariffs to 39% on Swiss GDP of about 0.86% in the first two years.”
De Montpellier recently revised her own growth forecast for Switzerland for 2026 down to 0.8% – almost half the growth rate she was forecasting at the beginning of this year.
“I believe that the risk are tilted to the downside and the likelihood of having a quarter of negative growth has strongly increased,” she said. “The Swiss economy, long buoyed by pharmaceutical exports, now faces a period of heightened uncertainty that will lead to a sharp deceleration of activity momentum.”

Swiss franc’s safe haven status is proving to be a headache for the nation

Melanie Debono, senior Europe economist at Pantheon Macroeconomics, said on Thursday that the new forecasts from the Swiss government were in line with her own.
“A fall in goods exports, as indicated by monthly nominal goods trade figures, coupled with falling investment — in light of the surge in uncertainty and despite [Swiss National Bank] rate cuts, which will ultimately feed through to lower interest rates faced by firms — means we expect the Swiss economy to enter recession in the second half of this year,” she told CNBC via email. “We think Swiss GDP will fall by 0.2% quarter-to-quarter in both Q3 and Q4.”

‘Terrible news’ for companies

Speaking to CNBC’s Carolin Roth on Wednesday, Georges Kern, CEO of Swiss luxury watchmaker Breitling, labeled the U.S. tariffs “terrible news” for Switzerland.
“39% tariffs is horrible,” he said. “Still, I believe it will be solved. Swiss politicians are really understanding how to deal with businesspeople. The Trump administration, these are businesspeople, these are not classic politicians … But I’m confident that within the next couple of weeks there will be a much better solution than the 39%.”

Kern said that as the tariffs came into effect, Breitling had hiked prices globally to offset the impact, noting that luxury brands had more flexibility in this regard.
“[In] the U.S. we increased prices 4%, but also worldwide to balance the cost of the tariffs because you cannot just increase prices to the consumer by 39%,” he explained. “Thank god we have a certain pricing power at our price point, I don’t think it will impact us dramatically, actually we’re growing.” More