ZURICH, Nov 17, 2025 (BSS/AFP) - Switzerland's economy contracted in the third quarter of the year, suffering from high US tariffs which abruptly curtailed exports across the Atlantic, the economy ministry said on Monday.

Swiss gross domestic product (GDP) dropped by 0.5 percent between July and September from the previous quarter according to preliminary data, a bigger fall than market analysts had anticipated.

Key economic sectors chemicals and pharmaceuticals saw sharp declines, the ministry said, while the service sector performed below average.

US President Donald Trump stunned Switzerland in August when he slapped an added 39-percent duty on imports of goods from the country, among the highest in his global tariff campaign.

But this now looks to be reversed. The US and Switzerland said on Friday they had reached an agreement to sharply lower the tariffs, with the Alpine nation vowing to invest $200 billion in the US to win over the White House.

The latest framework agreement brings this tariff down to 15 percent for Switzerland's products, the White House said.

The deal will alleviate fears, including in the country's famed watch industry and machine tool sector, of any lasting impact of the devastating tariff hike.

Switzerland had last month warned of an economic slowdown in 2026, partly sparked by the high tariffs.

Watch exports spiked in July before the higher tariffs entered into force but then fell by 23.9 percent in August and 55.6 percent in September, according to the country's watchmakers' association.

Employer federation Swissmem last week reported an overall 14.2-percent drop of Swiss exports to the US in the third quarter compared to the period a year earlier.

The association said it was "relieved" following Friday's deal, although the strength of the Swiss franc against the dollar was still a worry as it makes Swiss products more expensive for American consumers.

"The good news from the US tariffs was counterbalanced by the franc's persistent strength," commented Ipek Ozkardeskaya, senior analyst at Swissquote, a currency trading firm.

"The strong franc sure sounds like a first world problem -- and it is -- but it has concrete implications for businesses," she said.