Author: IntaCapital Swiss

ECB Holds Interest Rates Steady

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There were no surprises for financial markets as today and for the second meeting in a row the ECB, (European Central Bank) kept their key deposit rate unchanged at 2%. Officials at the ECB advised that inflation was under control and any economic pressures were abating but remained tight-lipped on future policy decisions. Experts suggest that investors have concluded that rate cuts have now come to an end with the President of the ECB Christine Lagarde announcing that “inflation is where we want it to be.”

Between June 2024 and June 2025, the ECB has halved its key deposit rate and has been held at 2% with President Lagarde going  on to say, “We continue to be in a good place”. Policymakers advise that the central bank see inflation falling below their benchmark target of 2% in 2026 with President Lagarde saying, “risks were more balanced” and adding “ Two things have clearly moved out of our radar screen when it comes to downside risk, the first one is risk of European retaliation the second thing… is that trade uncertainty has clearly diminished.

Interestingly the ECB also sees headline inflation hitting 1.9% in 2027 which is below their projected figure as advised in June of this year with core inflation hitting the 1.8% mark which is also below the ECB’s predicted target of 2%. When questioned on the discrepancies President Lagarde said, “We have indicated very clearly in our strategy that minimal deviations, if they remain minimal and not long-lasting, will not justify any particular movement”. Experts say that financial markets are pricing in only a 40% chance of a further rate cut by Q2 2026, this despite their predictions that the United States Federal Reserve will cut interest rates six times by the close of business 2026.

With regards to tariffs and after weeks of heated negotiations the EU (European Union) and Washington finally arrived at a trade agreement in late July of this year with an agreement of a blanket tariff on most exports including cars to the USA of 15%, half of the original 30% imposed by President Trump. In return the EU agreed to purchase USD 750 Billion’s worth of U.S. energy and invest an additional USD 600 Billion worth of investment  into the USA above current levels. President Lagarde noted that uncertainty about global trade has eased after a number of tariff deals including that of the EU.

One problem that looms large for the ECB is the parlous state of French politics and their economy which has pushed French bond yields increasingly higher. Experts say that whilst the ECB has the financial muscle to intervene it is only when unwarranted and disorderly rise in borrowing costs. When questioned on the point President Lagarde said that the Euro Zone sovereign bond markets were orderly and functioning with smooth liquidity. The word coming out of the ECB as described by some experts is that they feel rates are appropriate to cope with the fallout from President Trump’s tariffs, the current geopolitical tensions and any upcoming political and economic tensions in France.

The World Gold Council Looking to Launch a Digital Form of Gold

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The WGC (World Gold Council)* is, according to experts within this arena, planning to launch gold in a digital form, which may well create major changes as to the collateralisation, trading and settlement of gold, whilst at the same time transforming the USD 900 Billion gold market centred in London. David Tait, the current CEO of the WGC, when interviewed, said this new form “will allow for the digital circulation of gold within the gold ecosystem, using it as a collateral for the first time”.

*The World Gold Council – The WGC is an international trade association for the gold industry, it is headquartered in London and whose members are gold mining companies. The WGC is a market development organisation for the gold industry and works to champion the use of gold as a strategic asset.

The WGC has said that the digitisation of gold will broaden its market reach and they are trying, according to their CEO, David Tait, to standardise that digital layer of gold such that the various financial products used in other markets can be used going forward in the gold market. Gold has recently proved that it is still extremely popular especially as a safe haven as only last week it reached a record price of USD 3,550 per ounce having also doubled in price over the last two years.

Each digital unit of gold will be known as PGI’s (“Pooled Gold Interests”) and this will allow investors to buy a form of fractional interest in gold bullion. Over many years the OTC* (over-the-counter) gold has been settled through two key structures i). allocated gold and ii). unallocated gold

i). Allocated Gold is a form of gold ownership where physical gold is purchased (bars) and are stored in a secure vault and is legally owned by the purchaser and ownership is insulated from credit risks of the custodian bank. However, in order to attain this status, there is a limitation on holding only whole-bar multiples and increased operational complexity.

ii). Unallocated Gold is where specific gold bars are not set aside for the holder, rather the holder has a contractual right against the institution where their unallocated gold is held in respect of their entitlement. Unallocated gold has traditionally provided holders with greater liquidity through deeper markets and quick and simple settlement mechanics. However, the status for unallocated gold is that it requires holders to take the credit risk against the institution where their unallocated gold is held.

*OTC or over-the-counter gold refers to gold being directly traded between two parties (the buyer and the seller) rather than through a formalised or centralised exchange. This allows for flexible, customised transactions with such terms as quantity, quality and delivery being negotiated privately. Major clients within this market include central banks, refiners and investors with the London market being a central hub for these 24-hour transactions.

This proposal from the WGC would create a third type of transaction for the OTC gold in London and the pilot scheme due to be launched at the beginning of Q1 in 2026, will include major banks and trading houses as joint or co-owners of the underlying gold. This third pillar in the OTC market is known as the Wholesale Digital Gold Ecosystem (the “ECOSYSTEM) and will underpin as mentioned above, the new form of digital gold bars the pooled gold interests or PGI. This third transaction, or as the WGC refer to it, as the “Third Foundational Pillar” has been designed to sit alongside existing settlement through allocated and unallocated gold, with the belief that gold when paired with the new structure could unlock significant opportunities across financial markets with regard to trading, investment and collateralisation.

UK UK

Borrowing Costs for the United Kingdom Highest Since 1998 As Sterling Falls 1.5%

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Yesterday, 2nd September, the pound slipped a full 150 basis points against the US Dollar (came back to a 1% drop at $1.34) on the back of increasing borrowing costs on the 30-year gilt (UK Government Bond) which attained its highest level since May 1998. Thirty-year gilts rose to 5.72% and some commentators who are sympathetic towards the Labour government suggested that the coincidental global sell-off in government bonds was the main reason for the increase in yields. Indeed, the Treasury Minister, Spencer Livermore, when questioned on this subject in the House of Lords advised that gilt yields have risen in line with global peers and moves have been orderly.

In reality, experts in this arena suggest that the sell-off in long-dated UK government bonds is due more to global investors in the United Kingdom who are worried that the government is showing a lack of fiscal responsibility. Elsewhere other experts chimed in saying that as inflation has been sticky and remains the highest of the G7 countries is yet another reason for the sell-off in the 30-year issues. Equally damning, a number of economists and analysts suggest that the central issue is welfare expenditure which should it remain on what is generally agreed an unsustainable path, confidence will be further eroded resulting in more long-gilt selloffs. Other concerns for financial markets and investors alike has been the sudden rush in the number of potential new government policies reminding investors how weak the United Kingdom’s fiscal position is, which has, according to a number of financial commentators, also helped facilitate the rush to sell long-dated gilts.

However, there has been one reassuring sign in the UK government bond market, as on the day long-dated gilts borrowing cost hit the highest since 1998, the United Kingdom sold a record GBP 14 Billion of new benchmark 10-year government bonds with orders being oversubscribed to the tune of GBP 141.2 Billion. The notes which are due in October 2035 were priced according to those close to the sale at 8.25. basis points over the equivalent/applicable benchmark* and carry a coupon of 4.75%. Experts noted that the sale was ten times oversubscribed and with rates on the 10-year bond the highest since January would increase the case for buying this bond despite the fiscal uncertainty of the UK’s economy.

*Equivalent/Applicable Benchmark – This benchmark is known as SONIA (Sterling Overnight Index Average) which replaced sterling LIBOR (London Interbank Offer Rate) which uses real overnight transaction data to provide a more robust benchmark and is now the standard for new sterling denominated contracts.

The problem for the Chancellor of the Exchequer and the Labour Party is the cost of borrowing keeps increasing as can be seen by the latest GBP 14 Billion sale of 10-year bonds (the yield being the highest among the Group of 7 nations). Add to that the rise across the board in UK government bond yields, financial experts predict that the government will soon have to raise taxes to keep them within their own set of self-imposed fiscal rules. Borrowing costs are a key pillar that holds up the government’s fiscal arithmetic, and with the autumn budget looming high on the horizon the Prime Minister and the Chancellor could find themselves at the mercy of bond yields.

Financing a Super-Yacht with a Swiss Lombard Loan: A Simple, Step-by-Step Guide

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A Lombard loan is a line of credit secured against your liquid investments—typically cash, bonds, equities, and sometimes funds—held at a Swiss private bank. Instead of selling investments to pay for the yacht (and potentially triggering taxes or missing future market gains), you borrow against the portfolio at a relatively low “Swiss bank rate” (a floating base rate plus a small margin). You then use that cash to buy the yacht outright (or to fund the deposit alongside a marine mortgage). Your portfolio stays invested; the bank just takes a pledge over it as collateral.

Think of it like a high-end “asset-backed overdraft”: flexible, discreet, and fast—provided your assets and documentation are in order.

Why people choose this route
– Preserve your investments: You don’t have to liquidate long-term holdings you like (or ones with embedded gains).
– Potentially low cost of funds: Swiss private banks often offer competitive pricing for well-diversified, high-quality portfolios.
– Speed and discretion: Credit lines can be arranged quickly for qualified clients with established relationships.
– Flexibility: Interest-only, bullet, or revolving structures are common. You repay when it suits your liquidity plan (bonus, asset sale, refinancing, charter income, etc.).

What the bank looks at
Swiss banks determine how much they’ll lend by assigning advance rates to each asset class:
– Cash and short-dated top-quality bonds: high advance rates.
– Investment-grade bonds and diversified bond funds: relatively high.
– Blue-chip equities and equity funds: moderate.
– Concentrated single-stock positions, small caps, illiquid or complex funds: lower or sometimes ineligible.

The bank blends these into a credit limit. For illustration only: a diversified, high-quality portfolio might support a 50–70% credit line; lower for riskier or concentrated holdings. The exact figures depend on the bank, the assets, and market conditions.

The moving pieces, kept simple
1. Open or use your Swiss custody account. Your investments are held at the lending bank or a custodian they accept.
2. Sign a pledge agreement. The bank takes security over the portfolio. You keep ownership and remain invested.
3. Get the credit line. The bank sets a limit in your chosen currency (EUR, CHF, or multi-currency) with clear margin rules.
4. Draw down for the yacht. Funds go to the sale escrow or directly to the yard/broker at closing.
5. Optional: Combine with a marine mortgage on the yacht to reduce the draw on your Lombard line.
6. Service the loan. You pay interest (often quarterly). Principal is repaid on your timetable, subject to the facility terms.
7. Stay within margin. If markets fall and collateral coverage shrinks, you may need to top up or partially repay (a margin call).

Taxes, title and practicalities
– VAT and import: Depending on where the yacht will operate and be flagged, you may owe VAT or use structured solutions for commercial operation. Get specialist advice early.
– Flag, class and mortgage: If a marine mortgage is used, the bank (or marine lender) will register a mortgage over the vessel with the flag state. This can sit alongside the Lombard pledge on your portfolio.
– Insurance: Full hull, machinery, P&I (liability), crew and charter cover (if applicable) are standard lender requirements.
– KYC/AML: Expect thorough source-of-funds checks—routine at Swiss banks.

Examples for a €55 million purchase
Example A: All-cash via Lombard (portfolio large enough)
– Portfolio: €120 million, diversified, conservative.
– Bank advance rate (illustrative): 60%.
– Credit line: €72 million.
– Draw: €55 million for the yacht; €17 million headroom retained.
– Interest cost: Suppose an all-in floating rate of, say, 2.2% per year.
– Annual interest: ~€1.21 million.
– Why this works: You keep the entire portfolio invested; the loan’s cost may be lower than the portfolio’s expected long-term return.

Example B: Split financing (Lombard + marine mortgage)
– Portfolio: €60 million, balanced; bank advance rate 55% → €33 million credit line.
– Structure: €25 million on the Lombard line, €30 million marine mortgage.
– Annual debt cost: ~€2.125 million.

Example C: Bridge-to-liquidity
– Scenario: Committed to buy, awaiting business sale in 12 months.
– Portfolio: €40 million, high-grade; bank advances €24 million.
– Repay after liquidity event.

Does it pay to borrow?
If expected after-tax portfolio returns exceed after-tax borrowing costs, leveraging can be sensible.

Additional costs
– Arrangement fees, legal fees, appraisal, insurance, VAT/import, operating costs (8–12% of yacht price per year).

Risk management
– Diversify collateral
– Keep liquidity buffer
– Match currencies
– Hedge rate exposure
– Plan exits

Checklist
1. Define budget and usage
2. Assemble team early
3. Prepare portfolio
4. Obtain term sheet
5. Coordinate escrow and closing
6. Lock in insurance and flag
7. Post-closing housekeeping

Bottom line
Using a Swiss Lombard loan for a €55 million super-yacht lets you keep your investments working while unlocking liquidity to close the deal. For those with large, diversified portfolios and good risk management, it can be a discreet, efficient solution. 

Brushstrokes and Balance Sheets: How AI Is Repainting Art and Banking 

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From the Renaissance studio to the modern trading floor, two seemingly distant worlds—art and banking—have always been connected by one invisible thread: the search for value. Whether it’s a painter layering pigments to capture light or a banker layering risk models to capture returns, both are engaged in acts of creation, interpretation, and persuasion. 

Now, artificial intelligence (AI) has arrived like a disruptive patron, commissioning both artists and bankers to work in new ways. The same algorithms that can conjure a Rembrandt-style portrait from a text prompt can also forecast market movements or detect financial fraud. And the parallels go far deeper than the surface. 

The Canvas and the Ledger: Shared Foundations 

An artist approaches a blank canvas much as a banker approaches an empty ledger: with a vision. 

  • In art, the blank space is filled with form, colour, and emotion. 
  • In banking, the empty page becomes a structured composition of numbers, risk assessments, and projected returns. 

Both require a deep understanding of patterns. Where the painter sees symmetry, contrast, and movement, the banker sees cashflows, volatility curves, and correlations. AI’s great leap is its ability to read these patterns at a scale and speed that neither the artist’s eye nor the banker’s intuition could match. 

Pigments and Portfolios: Building Value from Components 

In the studio, a painting is built layer by layer—each pigment, glaze, and stroke contributing to the final image. In banking, portfolios are assembled asset by asset—each bond, share, or commodity adding to the whole. 

AI is transforming both processes: 

  • In art, generative models mix visual “pigments” from vast training datasets, producing new images in seconds. 
  • In banking, AI blends financial “pigments” from global data streams, assembling portfolios that respond dynamically to changing conditions. 

In both cases, the craft lies not in laying down every layer by hand, but in directing the composition—knowing which elements to combine and in what proportion. 

The Curator and the Risk Manager: Gatekeepers of Quality 

Art galleries rely on curators to select, frame, and present works in a way that resonates. Banks rely on risk managers to select, structure, and present investment opportunities that align with a client’s goals. 

AI can assist both roles: 

The AI curator can scan millions of artworks to find emerging styles or undervalued pieces. 

  • The AI risk manager can analyse decades of market data to spot anomalies and opportunities before they’re visible to humans. 

But in both worlds, the danger is the same: without a human curator or risk manager applying judgment, AI may promote works (or investments) that look promising in the data but lack lasting value. 

Forgery and Fraud: The Dark Arts of Both Worlds 

In art, forgery undermines trust in the market. In banking, fraud does the same. Both rely on deception—passing off something false as genuine. 

AI is a double-edged sword here: 

  • It can create near-perfect forgeries of artistic styles, challenging the notion of authenticity. 
  • It can also produce synthetic financial documents or deepfake identities to bypass security. 

Yet the same technology can also protect both industries. AI can detect subtle inconsistencies in brushwork that reveal an art forgery, just as it can detect unusual transaction patterns that signal financial fraud. 

Auctions and IPOs: Moments of Market Truth 

An art auction is a public performance of value discovery. Bidders raise paddles in response to the perceived worth of a work. An initial public offering (IPO) plays out similarly—investors subscribe to shares at a price determined by demand and expectation. 

AI’s role in both is growing: 

  • In the auction world, algorithms predict hammer prices based on past sales, artist trajectory, and collector sentiment. 
  • In the IPO world, AI models assess market appetite, optimal pricing, and timing. 

In both cases, AI becomes the backstage analyst, advising on how to position an asset—whether that asset is a painting or a stock. 

Commissions and Structured Products: Tailored Creations 

Wealthy patrons once commissioned paintings to match their tastes and ambitions. Today’s high-net-worth individuals commission financial products—structured notes, bespoke funds, or AMCs—designed to fit their risk appetite. 

AI accelerates customisation in both: 

  • In art, an AI model can adapt its style instantly to a patron’s preference—more chiaroscuro here, a hint of Cubism there. 
  • In banking, AI can assemble a product mix tailored to the client’s income goals, tax situation, and ethical preferences. 

The patron’s role is the same: to articulate intent clearly enough for the creator—human or AI—to deliver the desired outcome. 

Restoration and Portfolio Rebalancing: Preserving Value Over Time 

Art restoration keeps old masterpieces vibrant, repairing damage while respecting the original vision. In finance, portfolio rebalancing preserves the health of an investment over time, correcting drift while respecting the original strategy. 

AI is bringing precision to both: 

  • In restoration, AI can analyse old pigments to match colours exactly or reconstruct missing details based on historical records. 
  • In finance, AI can detect micro-shifts in asset performance and rebalance automatically to maintain alignment with objectives. 

Both aim to maintain integrity—ensuring that what was once valuable remains so in the present.  

Emotional Impact vs. Financial Impact 

 While art seeks to move the heart and finance seeks to move the bottom line, both ultimately trade in trust and perception. A painting’s value is what someone believes it’s worth; a bond’s price is what the market believes it will return. AI changes how both perceptions are formed. 

  • In art, algorithms can simulate the emotional weight of colour, light, and composition, influencing what audiences respond to. 
  • In finance, algorithms simulate the likely outcomes of investments, influencing where capital flows. 

The parallel is clear: AI’s predictions become part of the reality they describe, shaping demand in both markets. 

The Artist and the Banker: Directors, Not Replacements 

One fear looms large: will AI replace the artist and the banker? The more fitting analogy is that AI moves them both from craftspeople to directors. 

  • The AI-assisted artist might spend less time perfecting brushwork and more time conceptualising themes and narratives. 
  • The AI-assisted banker might spend less time crunching numbers and more time interpreting insights and advising clients. 

In both cases, the human becomes the storyteller—the one who frames the work, whether that work is a painting that hangs in a gallery or a portfolio that lives in a private bank’s vault. 

A Shared AI Renaissance 

The Renaissance was not just a rebirth of art; it was also a financial revolution, with the rise of merchant banks funding the projects that defined the era. Today’s AI revolution could be another shared chapter.

Imagine: 

  • AI curates an investment portfolio composed partly of tokenised artworks, valuing them with the same predictive analytics it uses for equities. 
  • Art collectors use AI to generate, authenticate, and value works that are instantly tradable as financial instruments. 

The boundaries blur. A masterpiece can be both an aesthetic object and a yield-generating asset. A bond can be both a source of income and a cultural statement, linked to projects that create beauty as well as profit. 

Conclusion: Guarding the Frame 

Whether you’re painting on canvas or painting numbers onto a balance sheet, the challenge in the AI era is the same: to use the machine’s capabilities without letting it define the work entirely. 

Frames matter—in art, they focus the eye; in banking, they define the rules. AI can fill the frame with astonishing skill, but it takes human vision to decide what belongs inside it. 

The artist and the banker have more in common than they might think. Both are in the business of shaping perception, guiding value, and leaving a mark that endures. AI is simply the newest brush in their toolkit, capable of making every stroke sharper, faster, and more intricate—provided they still hold the brush. 

Will Switzerland Join the United Kingdom’s Dirty Money Task Force?

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At the end of August 2023, Switzerland announced that they would be proposing new rules that would toughen anti-money laundering laws in response to claims by the United States who said that their sanction enforcements were weak. Indeed, the United States went further by saying that Switzerland had not done enough to crack down on the movement of dirty money.

To this end, Switzerland produced a proposal which included a “Federal Register” in which companies, corporations and other legal entities would find it harder for criminals and similar associates to hide assets from investigating authorities, and would have to disclose the names of any beneficial owners. However, much to the annoyance of the United States, the register would not be made public.

Previous to 2023, Switzerland had slowly been moving away from original traditions where bank secrecy was protected which at the time had made it the banking centre for the world’s rich. However, much criticism still emanated from the United States and a number of other countries as it was felt not enough had been done plus the enforcement of sanctions on Russia after the invasion of Ukraine seemed patchy at best.

Furthermore, at that time, Switzerland was also unwilling to join a multilateral task force designed to improve cooperation on seizing sanctioned Russian assets. However, as of Tuesday 19th August, it was announced that Switzerland is considering joining a British-led international task force, the IACC (International Anti-Corruption Coordination Centre), which targets “Kleptocrats*” in order to recover stolen assets.

*Kleptocrats/Kleptocracy – translated means “Rule by Thieves” and it is where corrupt government leaders systematically utilise their political power for criminal gain whereby they steal wealth and resources from their nation. This crime takes place on a massive scale which involves huge corruption that depletes a nation’s budget, hinders public services and economic development, and ultimately undermines democratic governance. Kleptocrats often hide their mass of stolen wealth in other countries which requires a transnational network of financial and legal enablers to obscure ownership and launder money, a problem that host countries together with the international community are continuing to struggle to combat.

Indeed, experts in this arena advise that sources close to officials confirm that Switzerland currently has observer status with IACC and during a visit earlier this month by the British Foreign Secretary David Lammy he discussed the possibility of the country participating further with the IACC and the possibility of becoming a full member. As a result, Switzerland is considering a number of options for future cooperation with the IACC but definite decisions have yet to be reached.

Joining the task force would enable Switzerland to share intelligence and work more closely with countries on investigations that target dirty money. The British Foreign Secretary has advised that Switzerland has been a key partner in the fight against corruption and illicit finance and further participation with the IACC would be invaluable. Since the illegal invasion of Ukraine by Russia on 24th February 2022, Britain has increased its efforts against illicit finance and has become the global leader against kleptocracy.

A Brief Overview – The Global Outlook for the Remainder of 2025

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The central banks’ banker BIS (Bank for International Settlements) recently said that fractious geopolitics and trade tensions have exposed deep fault lines in the global financial system and the then head of the BIS, Augustin Carstens, (retired 30th June 2025) said the U.S.-driven trade war and other policy shifts were fraying the long-established economic order. He went on to say the global economy is at a pivotal moment entering a new era of heightened uncertainty, which was testing public trust in institutions, as well as central banks.

Today, experts suggest that for the remainder of 2025 there will be a slowdown in economic growth characterised by falling inflation, however analysts point to sticky inflation in the United States, along with persistent risks emanating from geopolitical tensions, together with increasing trade tensions which could perhaps result in a more negative impact on the global economy. Indeed, some analysts who were expecting a soft landing for the global economy have retracted these opinions as said soft landing has suddenly disappeared from view, as long-established trade relationships began to crumble with the announcement back in April this year of higher-than-expected U.S. trade tariffs.

Some financial news outlets have suggested that emerging and long-standing structural challenges are being faced by the global economy, and, for over 20 years, productivity growth has been on a downward path in many of today’s advanced economies. Furthermore, with the introduction of Trump’s tariffs this could accentuate the decline as further pressure is placed upon supply chains who are also facing current geopolitical tensions (the ongoing invasion of Ukraine by Russia, Middle East tensions between Israel, Iran and Gaza, and the potential invasion of Taiwan by China) that could be the driver of more frequent supply shocks.

On the global inflation front, analysts suggest that inflation is set to decline, though at a divergent pace, with some economies enjoying further declines, whilst others, especially the United States, face possible increases due to tariffs. However, some forecasters are at odds with each other with the IMF (International Monetary Fund) predicting a steady global decline from 2024 to 2025, and one major Wall Street player suggesting a global core inflation increase for the remainder of 2025.

Some financial commentators have even pointed the finger at the President of the United States as a danger to the global economy, not only for the remainder of 2025 but potentially for the rest of his term in office. Indeed, his continued attacks on the Chairman of the Federal Reserve, Jerome Powell, and his attacks on the Federal Reserve itself for not reducing interest rates could threaten global financial stability. Some experts have pointed out the incumbent President was not elected due to his extensive knowledge of interest rates and all the attendant data that aids central banks in their decisions to hold, drop, or increase rates. The fear is that if politicians and in this case a U.S. president takes effective control of the Federal Reserve for their own political aims, this could set a dangerous precedent for other central banks where monetary policy is subject on a global basis to political interference.

There are a number of negative factors that could affect the global economy by the end of this year. Experts suggest that apart from geopolitical tensions, regional conflicts and trade wars, there is the negative impact of high public and private debt possibly exacerbated by higher interest rates, together with persistent/sticky inflation in some advanced economies along with stagnant productivity and an ageing population which can all have a negative effect on sustainable economic growth. Interestingly, as of today, India has been hit by a doubling of tariffs (for buying Russian oil) from 25% to 50%. There is no agreement in sight therefore India could serve as a template by the end of the year and into 2026 as to what impact tariffs have on their economy.

How Tariffs are being Weaponised by President Trump

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For years, international trade was as tranquil as it comes and within the offices of the WTO (World Trade Organisation) on the banks of Lake Geneva worked the trade lawyers and trade economists unencumbered by the problems of today. Sadly, the twin forces of geo-economic fragmentation and geo-political confrontation have undermined the balance of the global trade regime and what we witness today is the weaponisation of tariffs*. The most pronounced effect of tariffs in the present day has come from the White House with President Trump’s “Liberation Day” on 2nd April this year, where he announced punitive tariffs across the board on all of the United States’ trading partners.

*Tariffs – are defined as a tax on imported goods levied by governments typically as a percentage of the product’s value. It is designed to protect domestic industries, raise government revenues, or serve as a political tool in trade negotiations. Importers pay the tax which increases the cost of foreign products, potentially making domestic alternatives more attractive to consumers.

The return of Donald Trump to the White House has transformed the utilisation of tariffs into instruments of both economic and political coercion and in the process has reignited economic nationalism. Some experts argue that the weaponising of trade (via tariffs) is where existing trade relations are manipulated to advance political and geo-political objectives, the ultimate goal being to push another government to change its policies in favour of the country wielding the tariffs. The biggest offender in the new tariff war is the United States and as seen below, they have successfully employed tariffs to bend the will of certain governments to their way of thinking.

On the domestic front, (Trump’s efforts are not just confined to foreign governments), he is reshaping domestic supply chains and even threatening iconic power price points. However, there are downsides as the 50% increase in tariffs on imports of aluminium and steel*, (which came into effect on 3rd June 2025) have increased production costs for such brands as Home Depot, Walmart, Target, Lowes Proctor & Gamble and AriZona Iced Tea. Famed for its 99 cents cans AriZona sources most of its aluminium domestically, but tariffs on imported aluminium/steel distort the broader market increasing prices for all producers. The tariff will increase prices which will be passed on to customers, and in the case of AriZona this will undercut a key brand identity that has endured for decades.

*Aluminium and Steel Tariffs – The tariff on these two metals doubled to 50% on June 3rd this year with some counties getting exemptions and paying the original tariff of 25%. The impact of this increase in the US has potentially led to higher consumer prices and fewer jobs in downstream industries, including higher domestic commodity prices and supply chain disruption. Experts say the main reason for these tariffs are national security under section 232 of the Trade Expansion Act 1962 to protect domestic industries from unfair foreign competition and to help correct trade deficits.

Elsewhere on the domestic front on the 6th of this month President Trump announced a plan to impose a 100% tariff on imported semiconductors*, with exemptions for companies that commit to manufacturing in the United States. The White House framed the policy as national security concerns with over-reliance on Asian countries such as Taiwan and South Korea for critical technology. This move was not about trade imbalances, it was about forcing multinational companies to expand manufacturing with the borders of the United States. Interestingly, Apple has been exempt from these tariffs after pledging to invest USD 600 Billion into U.S. based chip production and related infrastructure. This has now set a precedent where tariff relief can be bought through commitments that serve President Trump’s domestic industrial goals.

*Semiconductors – is a material with electrical conductivity that falls between that of a conductor (e.g., copper) and an insulator (e.g., glass). Their unique ability to be controlled make them essential components of modern electronics including computer chips, transistors and diodes.

Under the current administration in the White House, experts conclude that traditional legal frameworks are being bypassed with tariffs which were originally imposed on China, Mexico and Canada by invoking the IEEPA (International Emergency Economic Powers Act) citing security reasons. This is a classic example of weaponising tariffs in order for Donald Trump to bend counties to his will. It did not work with China but initial reactions from Mexico and Canada showed that Trump had certainly won the initial battle but Mexico has had a stay of execution and Canada and the U.S. are currently in negotiations.

Elsewhere in Europe, the member countries have agreed to increase defence spending to 5% of GDP for NATO in line with the wishes of President Trump. However, analysts suggest that the invasion of Ukraine by Russia on 24th February 2022 prompted the European Union members to raise defence spending but interestingly it was not agreed upon for just over three years when President Trump introduced punitive tariffs.

In another example of weaponising tariffs, on 6th August President Trump issued Executive Order “Addressing Threats to the United States by the Government of the Russian Federation imposing additional tariffs, currently 25%, on Indian Imports (circa USD 81.4 Billion 2023). Experts suggest that India has been targeted because of their direct and indirect purchases of Russian oil (averages a 5% discount), and now the Indian tariff is 50% on most goods imported to the U.S. which is seen as a penalty for facilitating Russia’s oil trade. However, the White Hopes the weaponising of tariffs against India will hopefully persuade them to reduce their dependency on Russian oil. Also, in the week ending 25th July 2025, the White House agreed tariff deals with Japan, Indonesia and the Philippines; granting them lower rates than previously threatened in exchange for them to sign up to national security commitments, the verbiage of which was somewhat opaque.

Conclusion

President Trump has shown even his closest allies are not immune from weaponised tariffs and neither are historical neutral trading partners such as Switzerland who were recently hit with a 39% punitive tariff on Swiss goods, mainly pharmaceuticals, watches and luxury

goods. It appears that currently no country is safe from the Trump trade war machine which uses tariffs as a blunt instrument to beat other countries into submission.

In his second term, Donald Trump has elevated tariffs from a traditional economic safeguard to an overt instrument of political leverage. Whilst tariffs have long been used to protect domestic industries the current approach is far more aggressive as they are being imposed and lifted not purely on economic grounds, but as bargaining chips in corporate negotiations and diplomatic manoeuvres.

U.S. Investment Surges into European AI – A Swiss Perspective

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Since pulling back during 2023’s tech downturn, U.S. investors are once again muscling into deal flows in Europe – and AI is the magnet. Data released by PitchBook* shows the U.S. share of deal making in Europe is once again climbing, and the standout category which is pulling American investors back into the market is AI. Experts suggest that from a global perspective, the capital base is there as U.S. private investment in AI in 2024 was circa USD 109 Billion with ample dry powder** to deploy into the European markets when the time is right.

*PitchBook – Is the premier resource for comprehensive, best-in-class data and insights on the global capital markets.

**Dry Powder – This refers to unallocated cash reserves or highly liquid assets held by investment firms, venture capital funds, hedge funds, and private individuals which in this case is ready to be deployed for investment purposes.

A Brief Overview

From a Swiss vantage point there are three forces which are converging and the first is a dense research-to- start-up pipeline anchored by ETH Zurich and EPFL.

ETH Zurich is a public research university and is widely regarded as a leading institution known for its strong focus on science and technology, significant research contributions, and prestigious academic standings.

Based in Lausanne, EPFL is Europe’s most cosmopolitan university and it welcomes students, professors, and collaborators from more than 120 different countries. EPFL has both Swiss and international vocation and focuses/specialises on three different missions being teaching, research, and innovation.

The second force is regulatory clarity via the EU AI Act, with Switzerland chartering a lighter sector-based path.

The third force is Switzerland’s world-class infrastructure and their electricity reliability which makes the country (and its neighbours) a first-class destination to build and run AI.

Why Switzerland Hits the Sweet Spot

Talent and Spin-Out Velocity

ETH Zurich’s AI ecosystem is a massive magnet to investors as in 2024 ETH spinoffs raised CHF 425 Million across 42 rounds, a ten year ten times increase and a powerful sign that even in choppy markets the pipeline to start-ups is in a healthy state. Indeed, the ETH A1 centre’s network of affiliated start-ups spans applied robotics, industrial AI, and model reliability which according to experts is exactly where corporates from the United States are looking to invest their capital.

Regulatory Readability

As opposed to the EU’S (European Union) horizontal* AI Act**, Switzerland’s Federal Council chose a more sector-specific approach, integrating AI duties into existing laws whilst planning to implement the Council of Europe’s AI convention. This they felt would be more beneficial, rather than passing a sweeping one size fits all AI law, which for founders and investors reduces the legislative shock whilst still tracking the usual international norms on safety and rights. It should be noted that the EU AI Act is highly relevant to Swiss companies who are selling into the Eurozone/single market, as for example obligations for general purpose AI (GPAI)*** and the EU is ensuring that timelines do not slip. All in all, the dexterity and agility of the Swiss together with the EU-grade clarity on market entry makes investment decisions by U.S. investors much easier.

*Horizontal in Law – This refers to the ability of legal requirements meant to apply only to public bodies to affect private rights. It arises where a court dealing with a legal dispute between two private entities interprets a legal provision to be consistent with certain legal norms in such a way as to affect the legal rights and obligations of the parties before it.

**EU AI Act – On 12th July 2025 this Act was published in the Official Journal of the European Union and entered into Law and became binding on 1st August 2025. This Act refers to the European Union’s Artificial Intelligence, a comprehensive regulation aimed at governing the development and use of artificial intelligence systems within the EU. It is the first major AI regulation of its kind, and focuses on risk assessment, and categorisation of AI systems to ensure safety and ethical development.

***GPAI – This refers to all General-Purpose AI models as defined within the EU AI Act. These are powerful AI models trained on broad datasets****, capable of performing a wide range of tasks, and potentially integrated into various downstream AI systems. The EU AI Act places significant obligations on providers of these models, especially those with systemic risks.

****Datasets – This is a structured collection of data used to train and test artificial intelligence models. These datasets provide the raw materials for AI algorithms to learn patterns, make predictions, and perform tasks and can, simply put, be viewed as a textbook from which AI models can learn.

Infrastructure Gravity

The Alps supercomputer at the CSCS (Swiss National Supercomputing Centre) is a critical component offering significant processing power for AI applications and is a key part of the AI initiative at positioning Switzerland as a leading hub for trustworthy AI development. Overall, the build-out of AI in Europe is accelerating fast with San Francisco’s Open AI Inc launching their Stargate Norway, the first AI data centre initiative in Europe. Whilst this build does not situate itself in Switzerland, its proximity and any grid stability across the region changes the equation as to where to build AI-heavy companies and experts suggest that Switzerland is primed as a European hub that U.S. investors will back for “near-compute*” opportunities.

*Near-Compute – This refers to the concept of placing processing units (like CPU’s – central processing unit or GPU’s – graphic processing unit) closer to memory or even within the memory itself, rather than relying solely on traditional computing architectures. This approach aims to minimize data movement between memory and processing units which can significantly reduce latency and energy consumption.

Switzerland has enjoyed a number of AI deals such as Meteomatics in St Gallen, a USD 22 Million to scale high-resolution AI-enhanced weather models and drone systems selling into the automotive, aviation, and energy sectors. Another success is Daedalean the Zurich avionics-AI pioneer has just entered into (subject to closing a USD 200 Million acquisition by Destinus a big player in the European aerospace sector, who pioneer autonomous flight systems. Other successes included Zurich’s LatticeFlow, an AI governance and reliability model and ANYbotics which operates in the robotic sector and industrial AI.

Conclusion

Whilst Switzerland’s overall start-up funding cooled in 2024 (down CHF 2.3 Billion which is -15% Y-O-Y), interestingly AI rounds doubled accounting for 22% of all rounds, and is uniquely placed due to infrastructure, power/electricity, the ability to build AI with EU-Act readiness, the ability to stand next to compute, and the ability to use the country’s events and clusters as magnets for U.S and global investment. The macro capital tide is unmistakable with generative AI venture capital setting a new pace in Q1 and Q2 in 2025, and Switzerland sits first and third in Europe and globally respectively for Deep Tech venture capital funding per capita, which, according to experts indicates a strong international interest in the country’s AI ecosystem.

Furthermore, Microsoft has made substantial investments in Switzerland’s AI and cloud infrastructure including a USD 400 Million investment (announced in June of this year) to expand its datacentres near Zurich and Geneva which will meet growing demand for AI services whilst keeping data within the country’s borders. As mentioned before, the companies from the United States are taking bigger and bigger slices of the European AI action, and Switzerland will, according to experts, massively benefit because it pairs deep technical IP and enterprise-friendly regulation with direct access to the Eurozone’s markets.

The Bank of England Cuts Interest Rates

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On Thursday, 9th August the BOE (Bank of England) cut interest rates by 25 basis points to 4% and in the process, the MPC (Monetary Policy Committee) took borrowing costs to its lowest level since March 2023. However, this was no ordinary MPC meeting as for the first time in its 23-year history the vote was deadlocked and the committee took the unprecedented step of voting twice, with the vote finely split by 5–4 in favour of a rate cut. The decision by the MPC saw two senior voting members (Chief Economist Huw Pill and Deputy Governor Clare Lombardelli) vote against Governor Andrew Bailey, with officials being deeply divided over the direction of interest rates, with the United Kingdom not only experiencing a cooling labour market but a resurgence in inflation.

The last time the MPC cut interest rates was in May of this year and since then the opposition to interest cuts has unexpectedly grown, however as seen above the two dissenting votes for a rate cut helped win the day. The BOE is still sticking with its overall guidance informing the financial markets that rate cutting will be “gradual and careful” whilst warning of a cooling in demand for workers and an emerging slack in the economy. The Governor of the BOE Andrew Bailey reiterated previous comments by saying “it remains important that we do not cut bank rate too quickly, or by too much”. The MPC also pointed out that they expect inflation to hit 4% in September – up from the previously advised figure of 3.7%.

Elsewhere tax data suggests that since the Labour Government announced plans to increase employers’ payroll tax and the minimum wage, 185,000 jobs have been lost. Data from the BOE’s own survey of firms show a growing stagflation risk, and in the upcoming year, they expect businesses to put up their own prices by circa 3.7%. Indeed, the MPC further advised that since May of this year upside risks to the consumer price had moved slightly higher with particular emphasis towards rising food bills, and they went on to say that the outlook for employment growth over the next 12 months has deteriorated and the expectations on wage growth remains at 3.6% which is somewhat sticky and has become a bit of a hot potato.

Governor Bailey at a press conference once again insisted that interest rates are on a downward path and that the current inflation figure will only be temporary, but he was somewhat evasive and wary about when they will announce the next interest rate cut. Money market traders have reduced their bets on a November cut to under 50%, especially as Governor Bailey went on to say, “there is, however, genuine uncertainty now about the course of interest rates”. Experts suggest that the BOE is very worried that inflation may well persist as the current headline figure is way above the benchmark target, and there is the possibility that policymakers are considering ending the easing cycle.

Analysts suggest that there are interesting times ahead at the BOE especially as the world waits and sees the effect of President Trump’s tariffs on world trade and the global economy. Furthermore, Thursday’s interest rate cut was the most divisive under the five-year stewardship of Governor Bailey, plus no Deputy Governor has ever voted against Governor Bailey, that is until Claire Lombardelli’s dissenting vote. Such dissent from the Deputy Governor is highly unusual and highlights the deep fractures within the MPC as to how to tackle the resurgence in the current price pressures. The labour party happily points out that under their government borrowing costs have been coming down, but those rates dictated by the financial markets have been going in the opposite direction with the 30-year gilt yield prior to the BOE’s interest rate cut standing at 5.43%. After the BOE’s announcement last Thursday the 30-year gilt yield stood at 5.32%. Some commentators have made a somewhat damning point in that perhaps within the Bank of England there are those who are perhaps politically motivated and not so independent as we are led to believe.

Some experts suggest that the MPC in lowering the borrowing rate is in direct conflict with their prediction of inflation increasing and this despite the fact the United Kingdom has the highest inflation rate within the G7. Furthermore, analysts point out that since April, the pound has dropped 1.5% and 2.5% against the US Dollar and the Euro respectively leaving the pound open to further falls whilst pushing inflation up through higher import prices.

The current disagreements will also impact policymakers and their decisions as to how to tackle the current uplift in inflation and with the Governor and Deputy Governor seemingly split on monetary policy, Governor Bailey’s vote will become more and more important as the United Kingdom approaches the end of the year.

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