SNB Shouldn’t Try to Mitigate US Tariff Effects, Economists Say
Look, here’s the deal with the Swiss National Bank (SNB) and those rather steep US tariffs: a prominent group of economists is urging the central bank to resist any temptation to soften the blow through monetary policy. It’s a nuanced but firm message, essentially advising the SNB to stay in its lane and focus on its core mandate rather than trying to fix a problem that’s fundamentally a trade issue.
The prevailing sentiment among these economic minds is that monetary policy tools—think interest rates or currency interventions—are simply too blunt to effectively counteract targeted trade barriers. Trying to manipulate the Swiss franc to offset the impact of, say, specific tariffs on Swiss watches or pharmaceuticals, could easily lead to unintended consequences. We’re talking about potential accusations of currency manipulation from Washington, or perhaps even fueling inflationary pressures at home, neither of which is a desirable outcome for a central bank whose primary goal is price stability.
What’s more interesting is the underlying philosophy here. Central banks, especially one as respected as the SNB, are generally seen as guardians of macroeconomic stability. Their job isn’t to pick winners and losers in trade disputes, nor is it to paper over the effects of protectionist measures. If the SNB were to actively intervene, it could inadvertently create a moral hazard, signaling that governments can impose tariffs freely, knowing central banks will step in to cushion the economic impact. That’s a dangerous precedent to set, not just for Switzerland but for the global economic order.
The US tariffs in question, which have been quite a talking point across various sectors, are designed to protect domestic industries by making imports more expensive. For an export-driven economy like Switzerland, this naturally creates headwinds for businesses. Companies might see reduced demand for their products in the US, or face higher costs if they rely on imported components that are also subject to tariffs. However, the economists argue that these are microeconomic challenges best addressed through other channels—perhaps diplomatic negotiations, or by companies themselves adapting their supply chains and market strategies.
The SNB, of course, has a history of navigating complex international waters, particularly when it comes to the value of the Swiss franc. They’ve intervened in currency markets before, often to prevent the franc from strengthening too much and hurting exporters. But this situation is different. It’s not about general market volatility; it’s a direct political action in the form of tariffs. Using monetary policy to counter such a specific, politically charged issue could not only be ineffective but also drag the central bank into a political arena where it doesn't belong.
Ultimately, the message from these economists boils down to a call for prudence and a strict adherence to the SNB's mandate. In their view, the bank should continue to focus on maintaining price stability and a sound financial system, allowing the market and other policy levers to adjust to the effects of the tariffs. It’s a nuanced position, one that recognizes the challenges posed by protectionism but firmly believes that the central bank isn't the right tool for this particular job. For businesses in Switzerland, this means they shouldn't expect a monetary lifeline from Bern to mitigate tariff effects; instead, they’ll need to adapt to the new trade landscape on their own terms.
