2025 – Economic review

The resurgence of American protectionism was in the news regularly last year. The United States increased tariffs to levels not seen for almost a century. That decision revived fears of a slowdown in global trade and caused equity markets to fall in early April. The uncertainty then continued as Washington negotiated with the United States’ trading partners. Switzerland was particularly badly affected: Swiss exports to the US were hit with a 39% tariff in August, before an agreement was reached in November reducing it to 15%. Higher tariffs affect the entire Swiss export sector and small and medium-sized businesses in particular, with the notable exception of the pharmaceutical industry.

Despite these tensions, economic growth and corporate earnings remained solid overall in many countries, showing surprising resilience in the face of US protectionism. That resilience can be explained by several factors that boosted economic activity in 2025. In Europe, the possibility that the US will no longer help ensure security prompted governments to increase their defence budgets sharply. At the same time, Germany allocated more resources to upgrading various aspects of the country’s infrastructure. In the US, large-scale investments in artificial intelligence boosted economic growth, for example through the construction of datacenters. The US economy was also supported by tax cuts introduced by the Trump administration. Finally, global economic growth was stimulated by monetary policy in most countries, with Europe and Switzerland in particular cutting rates at the start of the year and the United States at its end.

Those developments were positive for equity markets, which saw share prices rise between April and December, resulting in gains of between 14% and 18% for the main indices in local-currency terms in 2025. However, there was a slight decline for government bonds – with the global index down as much as 1% – because of the prospect of higher government debt levels in many countries. The US dollar fell sharply against the Swiss franc, losing 12.6% as the market priced in the risks for the US economy arising from higher tariffs. It is best to take a cautious approach to this new environment, which includes a resilient but slowing economy that remains vulnerable to inflation, ongoing geopolitical tensions and a correction in AI-related share prices if revenue expectations fail to materialise.