Key Starbucks supplier in Switzerland tastes bitter harvest of Trump tariffs

By Dave Graham

WEGGIS, Switzerland (Reuters) -Swiss coffee machine maker Thermoplan was a small family firm until it rode the wave of late 1990s globalisation to become a key supplier for Starbucks and created more than 500 jobs in a lakeside village by the Alps.

The future of those jobs has been thrown into jeopardy since U.S. President Donald Trump on August 7 imposed 39% tariffs on Switzerland due to its trade surplus with the U.S.

Thermoplan CEO Adrian Steiner calculates the 39% levy and separate U.S. tariffs on industrial metals are costing the company in Weggis, on the picturesque shores of Lake Lucerne, around 200,000 Swiss francs ($250,000) every week.

"We're bleeding," he said. "It's obviously a losing business for us. We don't have the kind of margins to compensate for that."

Thermoplan is already taking steps to enable production in Germany so it can export under lower European Union tariffs, and is considering moving jobs to the U.S. to shore up business there.

Starbucks said it has had a long history of successfully navigating global changes, and is working closely with suppliers to help minimize any impacts on its business. After Trump first set out his global tariff plans on April 2, Thermoplan said it and Starbucks agreed to split the added costs.

The Swiss company, whose other clients include McDonald's and Nestle, is one of about 2,000 Swiss machinery makers that have carved out niches as specialist exporters despite high labour costs and the steady appreciation of the Swiss franc.

About one in every seven dollars made from exports by Swiss machine makers is U.S.-dependent, official data show.

But if Switzerland's tariffs stay at 39% and those on the EU at 15%, about four-fifths of U.S. exports from the Swiss mechanical and electrical engineering sector - worth some 10 billion francs last year - will disappear, said Jean-Philippe Kohl, deputy head of industry association Swissmem.

Tariff pressure could shift business to the EU, provided firms meet U.S. requirements to qualify as EU-based, Kohl said. A Swissmem survey showed nearly a third are considering it.

Jobs are already trickling away.

Around 3,000 in the sector went between the first and second quarters, Kohl said. At worst, that could become 30,000 by the end of 2026, he added.

'MADE IN SWITZERLAND'

In Weggis, there is disbelief that Thermoplan is now under threat from the United States.

"The USA is a really exciting country, be it for business or geographically," said Marcel Waldis, the municipal council's finance chief. "But right now, I'm deeply disappointed. How can it be that a big country is dependent on a single voice?"

With Switzerland attempting to negotiate lower duties, more tariffs possible, and U.S. legal challenges still pending, the outlook for Swiss firms is uncertain.

After Trump's April move, Steiner immediately instructed Thermoplan to look into producing in Germany.

Calling the tariffs "insanely unfair", Steiner said the idea of relocating jobs flew in the face of Thermoplan's "Made in Switzerland" seal of quality.

All Thermoplan's manufacturing is currently in Weggis, and 82% of components come from Switzerland. Fully 98% of its products are sold to export, and Starbucks accounts for 32% of its sales, about two-fifths of which are in the U.S.

Steiner wants Thermoplan to be able to begin manufacturing as soon as January in Germany.

But before it can, the firm has requested clarification from U.S. customs that the goods would qualify as EU-made. It hopes for word within a month, but Steiner worries the workaround will not satisfy U.S. officials.

"Because to be honest, I understand we're meant to go to America," he said. "Trump's goal is clear."

While conceding that such a move could ultimately benefit Thermoplan, Steiner said it may lack the muscle to uproot its supply chains to the U.S., and might not find enough skilled workers there.

A decision would need to be made within a year, and starting U.S. production could take over two years, he said.

And there is a deeper concern.

"If Trump gets what he wants with his power politics, there's a big danger other countries do the same," he said. "Then we'll have China First. India First. Russia First."

($1 = 0.8019 Swiss francs)

(Reporting by Dave Graham; Additional reporting by Savyata Mishra; Editing by Jan Harvey)