"Franc-ly, my dear..." tariffs won't matter

Reuters

"Franc-ly, my dear..." tariffs won't matter

11:24 sáng giờ GMT, 31 Tháng 10 2024

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"FRANC-LY, MY DEAR..." TARIFFS WON'T MATTER

Goldman Sachs FX analysts believe the Swiss franc could actually benefit from an introduction of U.S. import tariffs, aided by safe-haven demand and higher global inflation, while the direct impact on trade should be minimal.

Looking at trade, GS highlights that U.S. exports constitute a "meaningful share" of Swiss GDP, the second highest in the G10 behind Canada, but given the make-up of these exports, the impact could be lessened.

"We expect that Switzerland would be relatively more resilient to tariffs imposed by the U.S. due to a technologically advanced export basket with a high concentration of inelastic goods," they add.

"As a result, Switzerland is somewhat more insulated from trade policy shocks and would likely be able to pass a majority of the cost of tariffs back onto U.S. consumers."

Beyond the direct tariff impact, Goldman believes the possible hit to euro area GDP and investment from tariffs could indirectly support the franc.

"We've previously found that CHF is closely linked to European risk concerns and that it can be useful to think of CHF as a function of European safe-haven flows," GS adds.

Finally, should tariffs boost global inflation, Goldman thinks the franc could benefit given the SNB's stance on limiting price rises.

"Should global inflation pick up in response to higher tariffs, the SNB should be less concerned about CHF strength," Goldman writes, "even returning to guarding against currency depreciation as they did through much of 2022 and 2023 in order to keep a lid on inflation pressures."

On Wednesday, however, the central bank's new chairman Martin Schlegel said they stand ready to intervene in the currency to check any possible appreciation in the franc after the U.S. election.

The currency has been relatively rangebound in recent weeks, with one euro buying 0.941 francs EURCHF=EBS.

(Samuel Indyk)

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EARLIER ON LIVE MARKETS:

STOXX AT 7-WEEK LOWS CLICK HERE

EUROPE BEFORE THE BELL: TECH DRAG AND BANK EARNINGS CLICK HERE

CLOUDS GATHER OVER 'MAG 7' EARNINGS CLICK HERE

The Magnificent Seven https://reut.rs/4fqh78d

EU open https://tmsnrt.rs/4e4HCPr

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