Strong Swiss Franc Casts Shadow Over Key Export Sectors

Key Moments

Currency Misalignment and Competitiveness Concerns

Commerzbank’s Michael Pfister examines how the combination of a strong Swiss Franc (CHF) and an undervalued Chinese Yuan (CNY) is affecting Switzerland’s export performance. His analysis underscores that the appreciation of the franc is eroding price competitiveness, particularly once headline numbers are adjusted for distortions.

Pfister highlights the unique position of the Swiss currency in the developed-market universe, as well as its sustained strength against the euro in recent years. This backdrop is central to understanding the pressure facing Swiss exporters in several key industries.

Headline Export Gains Mask Underlying Weakness

According to Pfister, aggregate data initially suggest a relatively positive story: Switzerland increased its export market share in its most important destinations between 2019 and 2024. He also notes that this outcome holds even when incorporating 2025, which he describes as being distorted by US tariffs.

However, he stresses that this top-line view is misleading. Once exports of precious metals are stripped out, the trend reverses and Switzerland, on average, records a loss of market share. This adjustment exposes structural vulnerabilities in core export segments.

Medicines, Chemicals and the Role of China

Pfister identifies medicines as Switzerland’s largest export category and points to broad-based market share losses in this segment since 2019. These declines include cases of double-digit percentage point drops. While China has registered some gains in this area, he emphasizes that these have been comparatively moderate and do not explain the full extent of Switzerland’s losses.

He argues that much of the lost ground in pharmaceuticals has been captured by competitors other than China, implying that an undervalued CNY is not the main factor behind Switzerland’s challenges in this field.

The picture differs in the chemicals industry. Here, Pfister notes that Switzerland has also experienced notable market share erosion, but China stands out much more clearly as a beneficiary. He describes substantial market share gains by China, not only relative to Swiss exporters but at the expense of several other countries as well. In his view, this makes it more plausible that exchange rate dynamics, including the weak CNY, are exerting a stronger influence in chemicals.

Watches Show Resilience Amid Currency Headwinds

Pfister underscores that the effect of the stronger franc is far from uniform across sectors. He highlights the watch industry as an example where the impact appears limited.

“In fact, the Swiss franc is the only G10 currency that is overvalued against the US dollar according to OECD purchasing power parity – by more than 10%. As the franc has also appreciated significantly against the euro in recent years, this has likely exerted additional pressure on price competitiveness.”

“If we consider Swiss exports as a whole, Switzerland actually gained market share in its largest export markets between 2019 and 2024. This result remains robust even when 2025 – a year distorted by US tariffs – is included. But there is a problem with the figures: when adjusted for precious metals, Switzerland has, on average, lost market share.”

“In contrast, Switzerland has lost market share across the board in its largest export category (medicines) since 2019, with some losses amounting to double-digit percentage points. While China has also gained market share, this has only been to a lesser extent. The majority of this market share has thus been taken from Swiss exporters by other countries, suggesting that the weak CNY is unlikely to be the primary focus here.”

“Switzerland has also suffered significant market share losses in the chemicals sector. In contrast to the pharmaceutical sector, however, the winner is clearer here: China has made substantial gains (not only at the expense of Swiss exporters, but of other countries too). In other words, the exchange rate effect is most likely to play a role in this sector.”

“It is this differentiation that makes it so difficult to pinpoint the effect of the franc’s appreciation. In the watch sector, for example, the effect appears to be minimal. In the pharmaceuticals sector, the problem is not China, but rather other competitors.”