The Dilemmas of Negotiating Tariffs with Trump: The Swiss Disaster 

Since President Donald Trump’s April Liberation Day announcement on tariffs, countries have been scrambling to negotiate with the self-proclaimed Dealmaker-in-Chief. Not a simple affair. For while DJT basks in watching heads of state vie for his favors, global leaders try to understand how to negotiate with his ad hoc, spur-of-the-moment style. The negotiating process has been particularly revelatory and catastrophic for the Swiss who have a special two hundred year relationship with the United States. Washington’s announced 39% tariffs on Swiss exports have challenged whatever family bonds existed between the so-called Sister Republics. 

The Swiss were “shocked” at the 39% tariffs Trump declared in early August, the highest of any industrial country in the world; the only higher ones for the moment are Brazil (50%), Syria (41%), and Laos and Myanmar (40%). Neighboring European Union countries were taxed at 15%. The 39% tariffs have significant economic consequences for Switzerland since exported goods account for about one-fifth of its GDP, with the U.S. its largest export market. Sixty percent of Swiss exports to the U.S. will be effected including luxury watches and Nespresso coffee capsules. 

The high tariffs also shocked the Swiss because they ignored the historic and ideological connection between Switzerland and the United States. Among the relationship’s highlights:

Thomas Jefferson, it is believed, changed the Preamble to the Declaration of Independence from life, liberty and property to life, liberty and the pursuit of happiness after reading the Swiss legal and political theorist Jean-Jacques Burlamaqui.

The Genevan Albert Gallatin migrated to the United States in the 1780s, attended the Continental Congress and was a distinguished member of the House of Representatives. He was the longest serving American Secretary of Treasury (1801-1813), was influential in the Louisiana Purchase as well as founder of New York University. 

The 1848 Swiss bicameral, federal Constitution is very similar to the American Constitution.

The League of Nations was located in Geneva because of the close relationship between the Geneva academic and diplomat William Rappard and President Wilson’s close advisor Edward House.

The Swiss and American post offices issued a stamp commemorating the friendly relations between the two countries in 1991 on the 700th anniversary of the Swiss Confederation. 

Diplomatically, Switzerland represents the U.S. in the Islamic Republic of Iran – it was active in freeing the American hostages in 1981 – and hosted Reagan/Gorbachev, Biden/Putin summits.

Are 39% tariffs the way to treat a Sister Republic? 

How can a small country like Switzerland negotiate with Trump in a decidedly asymmetrical balance of power? More generally, how can any country negotiate with someone whose flights of fancy change from one moment to the next? (A TACO may be fine for eating but not for negotiating.) How can any country negotiate with someone who has no sense of history, liberal values, and is undiplomatically transactional?  

Trump defended the 39% in his typical business manner: “[T]he problem with Switzerland is that we have a $40 billion [CHF32.16 billion] deficit. I spoke yesterday to Switzerland, but we have a $40 billion deficit […] That’s a big deficit,” Trump was quoted by Italian news agencies in explaining the high number. A White House official elaborated that reasoning: “Switzerland, being one of the wealthiest, highest income countries on earth, cannot expect the United States to tolerate a one-sided trade relationship.” In other words, “You have a 39% trade surplus with the us, so we will hit you with 39% tariffs.” The negotiation was all about dollars and cents.

The 39% imposition was also a shock because the Swiss president, Karin Keller-Sutter, had had a most promising twenty-five minute exchange with Trump on April 9. “It was a friendly and balanced conversation,” she recounted after the telephone call. “I had the opportunity to explain to the American president the situation of the Swiss economy. I reminded him that we are a country that exports a lot, but has only nine million inhabitants. I also stressed that Switzerland is a very important direct investor in the United States,” she summarized the “friendly” call.

A few hours after the April call, Trump made a 180-degree turn on tariffs, announcing a temporary 90-day freeze on surcharges for all countries except China. “I don’t know if it was me who convinced him,” Keller-Sutter hinted. “Maybe it was a combination of factors, including my phone call,” she boasted in an interview with La Repubblica. So in addition to the historic relationship, there was the “friendly” April phone call as a further confidence-building measure. 

But the bonhomie did not last very long. Just before the 39% was to go into effect on August 1, a 30-minute telephone call between Keller-Sutter and Trump destroyed whatever mutual confidence remained after three months of negotiations. The late July call was nowhere near the April friendly. During the second call, an American official messaged a Swiss official to tell Keller-Sutter to stop the call because it was not going well. Trump later recounted that he thought he was talking to the prime minister of Switzerland. (There is none.) 

The Swiss press described the second call as “catastrophic,” “disastrous.” Leaked accounts indicate that the Swiss president had been “moralizing” Trump in her distinctive Margaret Thatcher manner. A local paper said, “this was Switzerland’s greatest defeat since 1515, when it lost a battle against the French” at Marignano, after which it declared neutrality and never again fought a battle outside its borders   A last minute visit by the Swiss president to Washington with a meeting with Secretary of State Marco Rubio saw no improvement in the Swiss predicament before the 39% tariffs took effect on August 7.

Perhaps the Swiss were too naïve in thinking that the historic/ideological background would positively influence the American negotiations. Perhaps the Swiss thought that by purchasing 36 American F-35 jet fighters for $6.25 billion they would be in good standing with Uncle Sam. Perhaps Karin Keller-Sutter was the wrong person to head the Swiss delegation. For whatever reason or reasons, the Swiss failed in their negotiations with Trump. 

Are there lessons to be learned from this case? I think of the recently deceased Tom Lehrer and his song parodying the Boy Scouts “Be Prepared.” Yes the Swiss could have been better prepared for Trump, both in terms of defending multilateralism/International Geneva and negotiating tariffs. There is no question that the Swiss extended negotiations with the European Union over a bilateral treaty have caused them to downplay transatlantic relations. 

As for directly negotiating with Trump, I once asked an eminent negotiating expert how one negotiates with a particularly difficult person or country. “You can’t negotiate with a terrorist,” he replied.  Or, as a Swiss writer recently noted; “Karin Keller-Sutter talking to Donald Trump is like discussing gastronomy with a cannibal.” 

As for the Art of the Deal, the Swiss tariff case shows that Trump is obsessed with America First and Trump First. Bullying is not negotiating, certainly not the cooperative way “Getting to Yes” is described by the negotiating gurus Roger Fisher and William Ury.

The Swiss may not have been well prepared. And the 39% tariffs are an economic challenge even for the healthy Swiss economy. But above all, the excessive tariff is further proof of DJT’s undiplomatic, real estate, transactional mentality. The Sister Republics are having more than a mere family feud. Trump is erasing all the positives that have connected the two countries for over two hundred years. 

  

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