Nervous Swiss ready Trump sweetened offer for tariff pain relief

By Dave Graham

ZURICH (Reuters) -Switzerland soon hopes to finalise a new business offer for Washington to ease its tariff burden, which will likely include more defence spending and greater access for U.S. energy interests, two people familiar with the matter said.

Switzerland was stunned when U.S. President Donald Trump this month hit it with one of the highest tariff rates worldwide - 39% - after complaining about the U.S. trade deficit with the country on a call with Swiss President Karin Keller-Sutter.

Since the levy came into effect on August 7, Swiss officials have been working with the private sector to craft an improved package of sweeteners in a bid to get the tariffs to somewhere near the 15% level Trump imposed on the European Union.

Mindful that U.S. Treasury Secretary Scott Bessent has suggested he wants pending deals with the likes of Switzerland wrapped up by October, Bern aims to complete the package by early September, two Swiss sources said, speaking on condition of anonymity.

The offer includes more potential defence procurement from the United States, plans to enable the U.S. to sell more liquefied natural gas through and to Switzerland, as well as more market access in some other areas, the sources added.

"The Swiss Federal Council remains strongly committed to improving the tariff situation with the United States," the economy ministry said in response to questions from Reuters, noting discussions are continuing at various levels.

The United States said on August 6 that Swiss officials had committed to strengthening joint defence cooperation after meeting U.S. Secretary of State Marco Rubio in Washington.

Among other measures under consideration to help lower the deficit are importing more planes, the Swiss unit of German airline Lufthansa said this month.

Prior to the July 31 Keller-Sutter-Trump call, Swiss officials had been quietly hoping that Switzerland might even get a better deal than the EU due to the strength of U.S. investment pledges by Swiss firms, one of the sources said.

The government said it had agreed a provisional trade deal with U.S. officials before that call.

In the event, Trump publicly complained Keller-Sutter "didn't want to listen" to his concerns about the U.S. trade deficit. That triggered domestic criticism of her and concern inside government that she had mishandled the call.

According to UBS, at the end of second quarter, Switzerland no longer had a goods deficit with the U.S. amid changes to trade after Trump's initial April tariff announcements.

The office of the U.S. Trade Representative, the U.S. Departments of Treasury, Commerce and State and the White House did not immediately reply to requests for comment on this story.

ISOLATION

For her part, Swiss President Keller-Sutter said she tried to explain to Trump why the tariffs were unjustified and how the United States benefited from its business ties to Switzerland.

The tensions have made some Swiss officials nervous that the personal chemistry between Trump and Keller-Sutter - who is president only for this year under Switzerland's annual rotating system - could hinder a revamped deal, one of the sources said.

This meant that while Switzerland wants the tariffs lowered before the U.S. gets used to the added import revenues, there is also a view in parts of the government that the negative vibes from the call should be allowed to fade before Trump's blessing is sought for the new offer, the person added.

As a result, Switzerland had to choose carefully when and how it put its new offer to Trump, the source said.

Nicolas Walder, a Green Party lawmaker in the lower house of parliament's foreign affairs committee, said the government had been complacent and too rigid in dealing with Trump.

Before Trump set the 39% tariffs, Swiss officials briefed the committee on their efforts to get the U.S. to lower the 31% rate he first proposed for Switzerland in April, he recalled.

But the officials did not want to entertain a plan B when asked what they would do if the approach failed, Walder said.

"They said: 'It has to work. He will understand.' They were sure they could make him change his mind," he said.

Some prominent Swiss firms including Swiss army knife maker Victorinox have since said they could shift production to the U.S. to limit the impact of Trump's tariffs.

Switzerland is now in a perilous situation unless it can forge stronger alliances in Europe and elsewhere, Walder said.

"Because if Trump is successful, the second-strongest will use the same methods," he said. "Why wouldn't China and the European Union do the same towards smaller countries?"

(Reporting by Dave Graham; Editing by Sharon Singleton)