But What will Happen to Switzerland?
Econintersect: The Swiss National Bank shocked financial markets on Thursday by scrapping a three-year-old cap on the franc, sending the currency soaring against the euro. Reuters said “stocks were plunging on fears for the export-reliant Swiss economy. Michael Haltman at GEI News (Switzerland Goes Further into Never-Never Land) had quotes from Clare O’Dea at SWI describing in detail how manufacturing, exporting and tourism in Switzerland would be hurt, but also pointing out that retail prices for the many imported products in Switzerland would be coming down.
Trade Summary for Switzerland
The Swiss have a relatively small balance of trade compared to the U.S., Germany and China, with latest data showing a trade surplus of nearly 4 CHF billion for the last month reported, November 2014. This had been driven up from the 5-year average around 2 CHF billion by the weakening euro and the franc peg to that currency. The trade surplus for Switzerland at 2 billion CHF is (+) 0.4% of total trade value (exports plus imports). The corresponding number for the U.S. is (-) 9-10% and for Germany about (+) 10%.
The countries that Switzerland trades with and the products traded are shown in the following graphics. Go to their source, The Observatory of Economic Complexity, for interactive graphics that show the data behind every tile by pointing with your cursor.
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With the change of the exchange rate for CHF to the U.S. dollar changing by 15% (1.02 CHF for 1 $ to 0.87 CHF, the cost of Switzerland’s most recent annual oil and petroleum products imports which cost about 13.76 CHF billion would have been a little less than 12 CHK billion. So there are some positives in the revaluation impacting the balance of trade.
Shaking up Forex
Primary effects (exchange with the Swiss franc) were generally large. Some examples: The U.S. dollar dropped about 15% against the franc, the euro about 16.7% and the yen about 12%. Rates have bounced around after the initial reaction as shown in the following charts.
