Swiss industry fearful of trade war as sales and exports fall

ZURICH, Feb 27 (Reuters) - Swiss industry sees no signs recovery this year after a tough 2024, a group representing the country's engineering and technical sector said on Thursday, with fears of trade conflicts adding to concerns over weak demand abroad.

Sales fell 4.6% and exports were 3.1% lower during 2024, said Swissmem, whose members include large companies like ABB ABBN.S, Siemens SIEGn.DE and liftmaker Schindler SCHP.S.

Weak demand in Europe was the main factor behind the downturn, with the United States and India the only markets to see higher exports last year.

Swissmem said it saw "virtually no indications of a recovery" amid escalating trade tensions, with the possibility of higher tariffs by U.S. President Donald Trump adding to the gloomy outlook.

"The worst case scenario would be the European Union responding in kind to blanket U.S. tariffs and treating Switzerland as a third-party country for the purpose of this response," said Swissmem director Stefan Brupbacher.

"Such a step would affect up to 70% of the Swiss tech industry's exports, and the fallout would be dramatic," he added, referring to the possible exposure if Switzerland was hit by European and U.S. tariffs.

Swiss industry - including chemicals and pharmaceuticals production - remains an important part of the economy, generating around 18% of Swiss GDP.

Some light came at the end of last year when Switzerland unveiled a new agreement with the European Union to deepen its links with the trade bloc, a deal welcomed by Swissmem which said further trade deals with should be pursued urgently.

Swissmem also called on the government to relax restrictions on armaments exports, which it said had weakened the domestic weapons industry in recent years.

Switzerland does not allow arms exports if the destination country is involved in an internal or international conflict, a situation which has prevented shipments to Ukraine of Swiss made weaponry.

The government this month proposed steps to allow it to deviate from its rules "in extraordinary circumstances."

"The Swiss defence industry cannot survive without exports, and Switzerland cannot guarantee its security without a defence industry of its own," it said.