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Swiss PMI Rises As China Trade Deal Begins

James Boston
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Swiss PMI Rises As China Trade Deal Begins

While Markit Economics prepare to release their monthly Purchasing Managers Indices for individual European and other developed economies this morning, the Swiss version of this indicator has been just published by SVME and Credit Suisse. The reading for the month of June is 54.0, slightly up on the May figure of 52.5 and ahead of market consensus estimates for a 52.8 print.

Today could well mark a turning point for Switzerland’s dominant manufacturing sector as a free trade agreement with China takes effect. Three years of negotiations have culminated in this morning marking the beginning of this long-term trade agreement between the two countries. The effect will see significant cuts to the tariffs imposed on Swiss goods arriving in China, the next five to ten years will see most import taxes eliminated with many of the initial reductions coming into effect from today.

This Chinese trade deal gives significant advantage to Swiss companies over their Eurozone rivals who receive no such preference and in the absence of meaningful trade talks it doesn’t seem like any Chinese trade agreement is on the cards for Europe anytime soon.

Tariffs for Swiss goods arriving in China have traditionally been higher than those from other developed economies, this is partially due to the Switzerland’s place as a manufacturer of high end luxury goods. Taxes on top end Swiss watches for example were levied at up to 60% on their arrival in China. Today’s deal not only levels the playing field for Swiss exporters, it goes beyond, taxes and tariffs will be reduced to near zero but additionally there are clauses that cover intellectual property rights, this will go some way to controlling the counterfeiting of Swiss goods by Chinese operators.

Germany is currently the largest recipient of Swiss exports but this fresh free trade agreement will render China the largest purchaser of Swiss goods within the next two decades.

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