The Peter Zeihan Podcast Series - The Swiss Are Screwed || Peter Zeihan

Episode Date: September 25, 2025

The Matterhorn, Nestlé Chocolate, and a long-standing history of neutrality, Switzerland has it all. However, the Swiss were too busy enjoying all those comforts and fell asleep at the wheel for the past few decades...Join the Patreon here: https://www.patreon.com/PeterZeihanFull Newsletter: https://mailchi.mp/zeihan/the-swiss-are-screwed

Hey, all, Peter Zeyn here. Come to you from Lost Canyon and the Lost Creek Wilderness in Colorado. And today we're going to talk about Switzerland. Switzerland has some really tough decisions ahead of it in the next few months. Very, very short history of Switzerland. Has been a neutral country for quite some time, has been armed to the teeth quite some time. But in the period, especially after World War II and especially after the Cold War system ended, Swiss defense has kind of withered away.

You can basically buy an exemption to the draft. Their military recruitment has basically fallen off and they've shut down most of the bunkers that they used to be once famous for They've done this because in the post- Cold War world we all got along and the European Union literally surrounds them completely and they fear no invasion from their near neighbors The Ukraine war was a rude awakening to them just like all the other Europeans and now they're part of the coalition that's supporting the Ukrainians But they don't have enough national offense right now to really be worthy of the name in the traditional sense That's number one. Number two, because they're neutral, they have always followed laws their own way. And this made them an offshore banking center.

You wanted to launder money, you'd put it there. You were Tin Pock dictator, you put it there. No one would ask you questions. Until a little guy by the name of Barack Obama said, no, we're not going to do that anymore. We want to tax that money. So the Obama administration leaned very, very heavily on the Swiss government and played a part in something called the Financial Asking Task Force. and basically Zurich shut down his international lending laundering center.

It's still a financial center, but if you want to do something illegal, you probably need to go to Cyprus or Dubai or something like that. So that's another major industry gone. Third, I don't know if you guys have been paying attention the last 30 years, but the Eurozone hasn't had the best time versus the other major economic blocks in the world. And Switzerland, their number one trading partner, is the collective European Union. And so we saw the Swiss currency gradually go up and up and up and up and up versus the Euro, which in trade weighted terms has gone down, down, down, down, down, down

until very recently. That means that Swiss industry is broadly uncompetitive, especially in things like agriculture. So that leaves the Swiss with two choices. Number one, subsidize the crap out of it, which is what they do say for their dairy industry. It's beautiful. Their farms are amazing, but they're definitely subsidized and not cost conscious. let's just say that. And then second, their manufacturing has had to get better and better and better in order to move up the value chain so they can swallow the higher currency so their products are all

luxury goods that people will pay for regardless of what the prices. So Swiss watches basically became a national strategy. This led them in the last 30 years to really go into biotech, especially drugs and medications, and that brings us to the current day. Donald Trump has put tariffs on countries that are not based on trade practices, but are based on how much you sell to the United States versus how much the United States sells to you. That's the only fact, well, that's one of two factors. The other factor is whether Donald Trump likes you or not. He doesn't like Switzerland, and the Swiss sell a lot of medications and things to the United States. They also sell gold, but Trump loves gold, so he made gold a carve out. There's no tax on Swiss gold.

Anyway, what this means is we now have a 39% tariff. It's one of the highest out there. And Swiss industry is scrambling and in some cases shutting down because it's just not viable them anymore. So the Swiss basically need to do one of three things. Number one, they need to find a way to make Donald Trump like them. They couldn't find a way to make a Barack Obama like them, so I don't think that's going to work. Number two, they have to relocate all of their drug manufacturing somewhere else. Trump would obviously like to come to the United States. He has said that we are going to have tariffs on medications coming soon. No idea what those numbers are going to be for sure, but the numbers that have been leaked out of the White House suggests somewhere in the 30,

to 100% range. It's not clear that Swiss have an interest of putting in the United States because that's only one of their markets, and the sales for each individual market don't really justify putting it all there, and you'd lose all your economies of scale if they put some in the EU and some in Japan and some in the United States. They're not sure what to do there. I don't blame them. Or third, shift the political alignments. The single largest chunk of Swiss trade is with the European Union. The European Union is a larger entity and can stand up to Trump's a little bit better can get it negotiated better trade deal. So if if if the Swiss were to join the EU that would solve some of their problems. Now the Swiss really do not want to do that. They

value their neutrality. They value their independence and the independence is not just Switzerland as a state. It goes down at the local level. Like the United States has states. They have something called cantons and almost all major decisions in foreign policy and trade and immigration and everything have to pass through approval of each individual canton. I mean, this is a country that did not make it legal for women to vote until 1991, because one German canton was holding out. And so for them to join the EU, they would first need to amend their constitutional structure

so that this is not how decision-making happens in Switzerland, because the EU will never let them in if the Swiss just gum up everything just by being Swiss. So either the Swiss are going to have a catastrophic, reduction in their standard of living as industries basically can no longer function in the new environment, or they have to get in bed with the monster that is at the door, and that's the European Union. Not a great position to be in, but that's where they are.