Switzerland, known for its delicious cheese and pricey price tags, is making a bold move against its notorious high cost of living by ditching most industrial tariffs starting in January. This means 95% of imports (up from 81%) will cruise into the country duty-free, potentially translating to cheaper cars, appliances, and clothes.

But wait, there’s a catch: agricultural goodies still get saddled with tariffs. This tariff-slashing crusade might halve customs revenue, a hefty hit for the WTO’s home turf. However, it’s hoped this move will boost competition and deflate the inflated prices of everyday stuff.

The good news? Inflation has already chilled enough for the central bank to take a break from raising interest rates. But there’s still room for prices to plummet further. To add to the cheer, the government is also aiming to cut the VAT-free shopping limit in half, a bid to keep Swiss residents from casually stocking up in neighboring France and Germany.

This tariff tango offers a ray of hope for Swiss citizens bracing for rent and electricity hikes in the new year. The government estimates a sweet deal for everyone – an 860 million franc welfare boost. But some skeptics worry corporate profits might just get fatter while the government scrambles to plug the revenue gap elsewhere.

“It’s a thumbs-up for free trade at a time when many countries are throwing shade on it,” says an expert, comparing this move to the US’s trade war tendencies. But, he warns, don’t expect a price revolution.

Why? Here’s the fine print:

  • Only 25% of imports still have tariffs, and for most, they’re pretty tiny.
  • Fashionistas rejoice! Clothing gets hit with the highest tariff percentage, so expect bigger savings on your next Zara spree.
  • Don’t dream of driving away in a tariff-free Ferrari – car savings will be modest. But cheap clothes? Now that’s a different story.

But, the big question is: will these tariff savings actually reach your wallet? Probably not in full, says the expert. He doubts intense competition will magically lead to all cost cuts being passed on to consumers. So, expect maybe a 1% discount, tops.

The government will keep a close eye on how this plays out and release a final report in 2025. For businesses, even a 1% cost cut is a win, plus getting rid of tariff paperwork is another bonus.

However, as the expert points out, ditching these tariffs might weaken Switzerland’s hand in future trade deals. After all, what leverage do you have if you’ve already given everything away?

So, will this tariff tango lead to a Swiss waltz of lower prices? Time will tell. But for now, cautious optimism seems like the right way to approach this bold experiment in cheaper living.

Source: www.bloomberg.com