Strategy Update: September 2025
How tariffs and gold distort global trade
REVIEW
THE FINANCIAL MARKETS IN AUGUST
The month began with a bang – not because of Swiss National Day, but due to the 39% tariffs imposed by the US on Swiss products on August 7. This represented an increase compared to the previously announced 31% and is therefore clearly above the rate for Europe (15%). It is the fourth-highest rate worldwide: only Brazil (50%), Syria (41%), Laos and Myanmar (40% each) are even more severely affected. You can find more information on the background to this in our focus topic. The Swiss stock market reacted surprisingly calm to the announcement. After a brief setback in the first two days of August, it gained ground over the rest of the month. Global stock markets also proved robust, with most closing the month in positive territory – remarkable given that August is historically one of the weakest months for the stock market. The markets appear to be largely unaffected by the back-and-forth of US politics: what is announced today may be revoked tomorrow.
The communication services sector was particularly in demand, with US heavyweights such as Alphabet, Netflix, and Meta continuing their strong performance for the year. In Europe, the focus was on financial stocks, especially banks from Spain, Italy, and Germany. The French market, on the other hand, was weighed down: the government crisis put pressure on government bonds and equities, with French banks in particular coming under pressure. The US government is using tariffs and subsidies to bring production and investment back to the country. This industrial policy approach is illustrated by the example of Intel: in return for billions in subsidies to expand US production, the US government is receiving a 10% stake in the struggling chip company. Further government investments in key companies cannot be ruled out. The continuing high demand for AI chips once again brought Nvidia surprisingly strong growth. The only downside was that investor expectations were slightly higher in the core data center business (89% of revenue).
In terms of commodities, energy prices were lower than in the previous month, while precious metals such as gold and silver rose. Coffee prices rose particularly sharply, increasing by around 32% since the beginning of August. This was due to US tariffs on imports from Brazil, the world‘s largest coffee producer, which grows more coffee than the next five largest countries combined. In terms of monetary policy, Fed Chairman Jerome Powell caused a ripple at the central bank meeting in Jackson Hole when he raised the prospect of an interest rate cut for the first time at the meeting on September 17. Powell spoke of a difficult situation for the Fed – on the one hand, with increasing risks of a weakening labor market, and on the other, with the danger of further rising inflation. The announcement bolstered the markets.
A few days later, further fuel was added to the fire when President Trump dismissed Fed Governor Lisa Cook. This move raised doubts about the independence of the central bank and its ability to keep inflation under control. Interest rates on short-term US government bonds fell and the yield curve steepened. The gap between the yields on five-year and 30-year US government bonds widened to 120 basis points – the largest since 2021.
OUTLOOK
FRAGILE GROWTH AND PERSISTENT INFLATION DOMINATE THE PICTURE, WHILE HOPES FOR US INTEREST RATE CUTS ARE RISING
The global economy remains fragile: global growth is slowing, while inflation remains stubborn in many places. The US is facing challenging times. While the labor market is showing initial signs of weakness, inflation remains stubbornly high. Economists expect inflation of 3–4% in the medium term, which is above the Fed‘s target. Private consumption, which has been a key driver of growth to date, is likely to lose momentum in view of rising prices and high debt levels. This increases the risk of stagflation. Growth momentum also remains subdued in Europe, with only moderate GDP growth expected.
Asia remains the most important positive counterbalance: according to the World Bank, global GDP growth will only be around 2.3% in 2025, and by 2027, global GDP growth in the 2020s is expected to average only 2.5%—the weakest figure since the 1960s. In contrast, “Emerging Asia” continues to grow at an above-average rate of around 4-5% for the coming years and is expected to contribute around 60% to global growth. The increase will mainly be at the expense of North America, whose contribution to global economic growth is expected to decline from 13% in the last two years to only 8% in 2025 and 2026. Central banks are acting cautiously in this environment. In the US, an interest rate cut of 25 basis points is expected in September, with further steps likely to follow. In Switzerland, however, interest rates remain low and there is no sign of recovery – partly because measured inflation is very low. Negative interest rates continue to be priced into the capital market, with the result that CHF swap rates remain negative even for two-year maturities. This environment offers advantages for borrowers: low mortgage rates are supporting the real estate market. The upcoming vote on abolishing the imputed rental value could provide additional stimulus. If accepted, many owners, especially new buyers and retirees, would see tax relief, while properties with high loan-to-value ratios or in need of renovation would tend to be disadvantaged. Uncertainty remains high in terms of trade policy. The US is by far Switzerland‘s most important export market, especially for pharmaceutical products and precious metals. These have so far been exempt from the new tariffs, but the burden on small and medium-sized enterprises is noticeable. While globally positioned corporations are more resilient, SMEs are under greater pressure – at the same time, crises also create opportunities for innovation and efficiency gains in Swiss industry.
Optimism and skepticism are evenly balanced on the capital markets. The prospect of falling US interest rates is supporting the stock markets, but valuations are already ambitious in many areas. Companies with high pricing power that can pass on rising costs remain particularly in demand. Commodities offer important protection against inflation in this environment.
FOCUS
HOW TARIFFS AND GOLD DISTORT GLOBAL TRADE
The US punitive tariffs on Swiss exports have shaken trade relations. The high tax rate of 39% is officially explained by the trade deficit – but the figures are massively distorted by gold trading. Switzerland plays a key role as a global refining center: a large proportion of the gold traded worldwide is processed here and distributed via London or New York.
TARIFF DISPUTE
Just on Switzerland‘s national holiday, the big shock came from the US: exports to the United States will be subject to a 39% tariff in the future. This rate is significantly higher than the 31% announced on “Liberation Date” and is one of the highest in the world – only India, Brazil, Syria, and Myanmar are more severely affected. How did it come to this? By way of comparison, the EU was able to secure a significantly lower tariff rate of 15% by making certain concessions. It is well known that the tariffs imposed by the White House appear arbitrary to a certain extent. However, the official argument is simple: the larger the trade deficit, the higher the punitive tariff. This is precisely one of the reasons why Switzerland is so severely affected. In the first quarter of 2025, the trade deficit with the US amounted to a staggering USD 54 billion! This puts Switzerland in fourth place among all trading partners – directly behind China. But how can a relatively small country, which is primarily considered a service economy, have such a high deficit? A closer look at the figures shows that, historically speaking, the deficit was significantly lower and only skyrocketed at the beginning of this year. The reason for this is easy to find—gold.
ROLE OF SWITZERLAND
Often barely visible, but hugely significant – a large proportion of the world‘s gold trade passes through Switzerland – or, more precisely, through Ticino. Up to 70% of the gold mined worldwide each year passes through the country‘s five large refineries, where it is melted down, purified, and processed into new bars or semi-finished products. Switzerland‘s central role in this trade has historical roots. Thanks to political stability, a strong tradition in precious metal trading, and high technological standards, Switzerland has established itself as a global hub for gold over many decades. For international trade, this means that fluctuations in gold import and export figures can massively distort Switzerland‘s overall trade balance – regardless of whether the gold ultimately remains in Switzerland or is merely “transited” through the country. This also explains why the trade deficit with the US exploded so suddenly in 2025. Extensive “hoarding” of physical gold significantly distorted the trade balance during this period. The increase is therefore less a reflection of an actual imbalance in consumption or production and more a result of the special role played by the Swiss gold industry.
LONDON – NEW YORK
In gold trading – as is generally the case in the commodities market – a distinction is made between the spot market and the futures market. The spot market for gold is located in London at the London Bullion Market Association (LBMA). Trading there is mainly over-the-counter (OTC), i.e., directly between market participants. The basis of the exchange is 400-ounce bars (approx. 12.4 kg), which are about the size of a brick. In New York, on the other hand, the futures market is located at COMEX. Here, futures contracts on gold bars are traded.
Unlike London, this market is significantly more liquid – partly because physical delivery does not usually take place. Instead, futures contracts are usually offset against each other before maturity or “rolled” into later contracts. However, if physical delivery is requested, it is not in large 400-ounce bars, but in standardized 100- ounce bars (approx. 3.1 kg), which are similar in size to a smartphone. This is where Switzerland comes into play as a refining hub. The bars required for trading on the New York Stock Exchange are first purchased in London, then melted down and recast in Switzerland before finally being shipped to New York. This process incurs not only refining costs, but also considerable expenses for transport and insurance. As a result, the forward price in New York is usually higher than the spot price in London – in the financial world, this effect is known as contango. The buyer of the forward contract is willing to pay a premium for the future price of gold. Put simply, the trader in New York pays a surcharge for, among other things, processing and transport from London to New York.
STRESS IN THE SYSTEM
The premium – i.e. the difference between the forward price and the spot price – is generally composed of interest, storage, refining, and transportation costs and remains relatively constant, apart from the interest rate level. In recent weeks, however, this price difference has widened significantly. The reason for this was uncertainty as to whether gold imports from Switzerland would be affected by the new US tariffs.
On August 8, the Financial Times reported that gold could indeed be subject to punitive tariffs. As a result, US gold futures on the New York Stock Exchange shot up to a new daily high of USD 3,534 per troy ounce, while prices on the spot market in London remained largely unchanged. This widened the price difference between the two trading venues to over 2%. The reason for this is obvious: the physical delivery of futures traded in New York requires bars that are usually refined in Switzerland. If these had actually been subject to a 39% tariff, this would have massively increased the cost of delivery to New York.
The gold market would have been thrown into turmoil, as the price difference between New York and London would have become even greater and potential arbitrage opportunities would have arisen. Shortly thereafter, however, the US government reassured the market by confirming that gold would be exempt from the punitive tariffs. This news immediately led to a normalization of the situation – prices in New York stabilized again and the high premium compared to the London spot market disappeared.
FULL VAULTS IN NEW YORK
Even though recent developments have led to a significant increase in stress within the system, the news did not come as a complete surprise to many traders. Gold reserves in New York had been steadily increasing since the beginning of the year. The gold required for this purpose arrived in the US via Switzerland early in the year in order to be made available for possible physical deliveries. The major COMEX vaults – in particular Brinks, HSBC, and JP Morgan – currently hold around 40 million ounces of gold, equivalent to approximately 1,235 tons with a market value of around USD 95 billion! By comparison, in November 2024, when Trump was elected president, gold reserves stood at 17 million ounces, less than half of today‘s reserves. This massive build-up of reserves illustrates how great the uncertainty in the market is at the moment.
Market participants have taken precautionary measures to protect themselves against possible supply bottlenecks or regulatory surprises – a clear signal that confidence in the stability of trade flows is currently fragile.
GOLD REMAINS A CRISIS INDICATOR
Political uncertainties and recent tariff measures have led to a period of exceptional tension on the gold market. Switzerland plays a central role in this, as a large proportion of global gold trading is handled by its refineries. The massive build-up of gold reserves in the major COMEX vaults is more than just a reaction to trade tariffs: it reflects mistrust in the stability of international trade flows. At the same time, the complexity of the supply chain creates financial incentives for everyone involved in the process—from refineries and transport companies to traders who are willing to take the risk of buying gold bars and shipping them to New York. However, it is precisely these structures that reveal the weaknesses of the system: stressful situations highlight just how fragile trade flows actually are.
The aggressive accumulation of gold reserves in the US can also be interpreted as part of a broader strategic hedging strategy. In times of global uncertainty, physical gold is considered the ultimate reserve for governments, banks, and investors to hedge against currency risks, payment defaults, and geopolitical escalations. The parallels with history are striking: in the 1960s, France under Charles de Gaulle repatriated large portions of its gold reserves from the US because confidence in the dollar was waning. Today, we are seeing similar patterns, except that this time it is the US itself that is massively increasing its physical holdings.
The combination of high tariffs, massive gold purchases, and growing mistrust could be an indication of a deeper geopolitical realignment. Whether this is preparation for major economic conflicts or even military tensions remains to be seen. One thing is certain, however: gold today, as in the past, reflects fears of a systemic stress.