How hard will US tariffs hit Swiss small- and mid-caps?
Swiss small- and mid-cap stocks have recently regained favour among investors after a prolonged dry spell. This resurgence comes despite exorbitant US tariffs. Here are the reasons behind this trend, and key considerations for investing in this segment.
Authors: Stefan Lutz, Product Specialist and Felix Morger, Portfoliomanager
Investing in Swiss small caps: three key points
- Over the long term, Swiss small- and mid-caps have significantly outperformed large-cap SMI-listed stocks. However, the opposite has been true over the past three and a half years.
- Active selection of Swiss small- and mid-cap stocks is essential to unlocking return potential.
- Small- and mid-caps are only partially affected by high tariffs, as most companies are already internationally diversified and can relocate production if necessary.
In early August, US President Donald Trump unexpectedly wielded the tariff hammer against Switzerland. As a result, the majority of Swiss exports to the US have been subject to a 39% tariff since 7 August. At first glance, this appears to be a gut punch for small- and mid-sized Swiss companies with significant US exposure. However, a closer look reveals a more optimistic picture, at least from a stock market perspective.
Swiss small caps in the fast lane
Between May and August, the SPI Extra TR, which tracks Swiss small- and mid-cap stocks, surged by 9.2%. In comparison, the SMI TR barely moved during the same period, gaining just 1.0%. Assuming that stock markets anticipate both negative and positive developments, the US tariff hammer appears to have had a limited impact on small- and mid-cap stocks.
The fact is that the majority of Swiss small- and mid-caps already have alternative production facilities in the US or the EU. These facilities can be relatively easily expanded to serve the American market at lower tariff rates. Moreover, European markets are far more critical for Swiss exporters than the US market (see the chart below).
Strong export economy and broadly diversified foreign trade
A closer look at small- and mid-caps
This is no reason for investors to rest on their laurels. Instead, careful analysis of each company is essential. Key questions include: Where does the company produce, and for which markets?
Long-standing expertise in analysing Swiss small- and mid-cap stocks, as well as close relationships with individual companies, is invaluable here. To illustrate, consider the following examples:
- Lindt & Sprüngli: The chocolate manufacturer generates around 40% of its revenue in the US but primarily produces locally and boasts strong pricing power. As a result, US tariffs play only a minor role.
- SKAN Group: The Basel-Land-based company produces isolators for the pharmaceutical industry. The US is a key market for SKAN, while its direct competitors are based in Germany. To level the playing field, SKAN plans to serve the US market from its German facility in the future.
- Tecan and Swatch Group: The situation is more challenging for the watchmaker Swatch Group and the laboratory equipment supplier Tecan. These companies lack significant production facilities in the US and currently rely on local suppliers in Switzerland.
Obstacle for small, unlisted companies
The new tariff situation is particularly challenging for small, non-listed Swiss companies. These firms often lack the financial resources to relocate production abroad. Instead, they rely on government support measures, such as extended short-time work schemes, and on Swiss diplomacy to negotiate lower US tariffs. On a positive note, Switzerland’s trade deficit has already narrowed significantly in the second quarter of 2025.
Conclusion
With a disciplined bottom-up stock-picking approach, Swiss small- and mid-cap stocks can deliver attractive returns. The Swisscanto (CH) Equity Fund Switzerland Small & Mid Caps II (hereafter referred to as SWC SMC II) has demonstrated this, achieving gross performance over one, three, and five years that has significantly outpaced both its benchmark and comparable peer funds.
Top performance (gross) of small and mid-cap funds in direct comparison
The chart compares the performance of the "SWC SMC II" strategy with the SPI Extra benchmark and the Morningstar peer group category "Switzerland Small/Mid-Cap Equity" as of the end of August 2025.
Top performance (gross) in direct comparison with the highest-volume competitors
The chart compares the performance of the "SWC" strategy with the five largest peers (average return) in the Morningstar category "Switzerland Small/Mid-Cap Equity" as of the end of August 2025.
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