Created
: 2025.08.05
2025.08.05 14:10
The USD/CHF pair trades in positive territory around 0.8090 during the early European session on Tuesday. The Swiss Franc (CHF) softens against the Greenback after US President Donald Trump hit Switzerland with a shock 39% export tariff. However, rising September Federal Reserve (Fed) rate cut bets might cap the upside for the pair. The US July ISM Services Purchasing Managers Index (PMI) data will be in the spotlight later on Tuesday.
Trump will impose a 39% tariff on imports from Switzerland, one of the highest levies globally, which threatens to leave the country's key exports reeling. The Swiss government said on Monday that the country is ready to make a "more attractive offer" in trade talks with Washington. It is unclear if Switzerland and the US will strike a trade agreement ahead of the deadline. This, in turn, exerts some selling pressure on the Swiss Franc (CHF) and creates a tailwind for the pair.
Friday's weaker-than-expected US Nonfarm Payrolls (NFP) report pointed to a cooling labor market and fueled speculations that the Fed will resume its rate-cutting cycle in September. Financial markets are now pricing in nearly an 84% chance that the Fed will reduce rates by 25 basis points (bps) in the September meeting, according to the CME FedWatch tool.
San Francisco Fed President Mary C. Daly said on Monday that, given mounting evidence that the US job market is softening and no signs of persistent tariff-driven inflation, the time is nearing for interest rate reductions. The downbeat US job data and dovish remarks from the Fed officials could undermine the Greenback against the Swiss Franc (CHF) in the near term.
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
Created
: 2025.08.05
Last updated
: 2025.08.05
FXStreet is a forex information website, delivering market analysis and news articles 24/7.
It features a number of articles contributed by well-known analysts, in addition to the ones by its editorial team.
Founded in 2000 by Francesc Riverola, a Spanish economist, it has grown to become a world-renowned information website.
We hope you find this article useful. Any comments or suggestions will be greatly appreciated.
We are also looking for writers with extensive experience in forex and crypto to join us.
please contact us at [email protected].
Disclaimer:
All information and content provided on this website is provided for informational purposes only and is not intended to solicit any investment. Although all efforts are made in order to ensure that the information is correct, no guarantee is provided for the accuracy of any content on this website. Any decision made shall be the responsibility of the investor and Myforex does not take any responsibility whatsoever regarding the use of any information provided herein.
The content provided on this website belongs to Myforex and, where stated, the relevant licensors. All rights are reserved by Myforex and the relevant licensors, and no content of this website, whether in full or in part, shall be copied or displayed elsewhere without the explicit written permission of the relevant copyright holder. If you wish to use any part of the content provided on this website, please ensure that you contact Myforex.
Myforex uses cookies to improve the convenience and functionality of this website. This website may include cookies not only by us but also by third parties (advertisers, log analysts, etc.) for the purpose of tracking the activities of users. Cookie policy