Swiss manufacturers warned on Friday that tens of thousands of jobs were at risk after US President Donald Trump hit them with one of the highest tariff rates in his global trade reset, even if there was some relief for the key drugs sector.

The government said it was “disappointed” and would decide how to proceed after Trump set a 39 percent tariff on the export-reliant country — more than double the 15 percent rate for most European Union imports into the United States.

The levy — up from an originally proposed 31 percent tariff that Swiss officials had described as “incomprehensible” — is a body blow for the small Alpine nation, which counts the US as the top export market for its watches, jewelry and chocolates.

Its main export to the US is pharmaceutical products — $35 billion last year — though officials said drugmakers should not be affected by the higher rate for now.

“It’s a massive shock for the export industry and for the whole country. We are really stunned,” said Jean-Philippe Kohl, deputy director of Swissmem, representing the mechanical and electrical engineering industries.

“The tariffs are not based on any rational basis and are totally arbitrary... This tariff will hit Swiss industry very hard, especially as our competitors in the European Union, Britain and Japan have much lower tariffs.”

The government said it remained in contact with US authorities about the tariffs and “continues to strive for a negotiated solution.”

“It is a pity that there is a tariff that is much higher than what we negotiated,” President Karin Keller-Sutter told Reuters on the sidelines of a Swiss National Day event in Ruetli.

The new rate is set to take effect on August 7, and a Swiss source familiar with the matter said negotiations would continue.

“We are not discouraged and continue to strive for an agreement in the interests of both sides,” Foreign Minister Ignazio Cassis said in Gersau.

UBS Global Wealth Management’s Chief Investment Office said its base case remains that Switzerland would eventually reach a deal similar to the one secured by the EU, which had 15 percent tariffs on imports to the US.

“We expect weak growth but no recession for the Swiss economy in the coming quarters,” it said in a statement reacting to Friday’s hike.

Swissmechanic, which represents small- and medium-sized companies, said the new rate threatened Switzerland’s future as a business location.

There was some respite for now for the pharmaceuticals sector, which includes industry giants Roche and Novartis, as they were not included in the 39 percent rate.

“Swiss authorities understand that the tariffs should not include the pharmaceuticals sector,” a spokesperson for the Economy Ministry said.

The sector still faces the possibility of separate levies.

Pharmaceuticals have historically been spared from trade wars due to the potential harm to patients. But Trump has said he wants to reduce the industry’s reliance on foreign-made drugs and bring prices down.

He has launched a Section 232 national security investigation into the pharmaceutical sector worldwide, with a decision on whether to impose separate tariffs on that sector expected in the coming weeks. Trump said in July those duties could be as high as 200 percent.

A Swiss business association of over 250 chemical, pharmaceutical, biotech and other scientific firms in Switzerland warned that the country’s chemical and pharmaceutical industry could still be affected by these tariffs.

“Pharmaceutical products are part of complex, globally interconnected supply chains. New tariffs would place a heavy burden on these structures, with growing uncertainty for companies and serious risks to the supply of vital medicines, particularly in the USA,” the association said in a statement.

Some recent bilateral trade deals — including for Japan and the European Union — have established tariff rates that would shield pharma from potentially higher sector-specific rates.

Swiss exports to the United States were worth around $74 billion last year, according to UN Comtrade data, $35 billion of those pharmaceutical products.

The United States imported $203 billion in pharmaceutical products in 2023, with 73 percent coming from Europe — primarily Ireland, Germany and Switzerland. Total US sales of finished pharmaceuticals that year were $393 billion.

“It is crucial that Switzerland continue negotiations with the US to reduce general tariffs and prevent specific tariffs on pharmaceutical products,” industry association Interpharma said.

Trump’s announcement differs significantly from a joint draft statement approved by the Swiss government on July 4 after intensive talks with the US, the Finance Ministry said in a statement, without giving details.

Swiss officials have been waiting since then for a sign-off on what was understood to be a preliminary framework for a deal, according to a person familiar with the matter.

Finance Minister Karin Keller-Sutter and Economy Minister Guy Parmelin had visited Washington to press their case; Switzerland is the seventh-largest investor in the United States. It says its direct investments of more than $300 billion supported half a million US jobs.

Switzerland sent about 65 billion Swiss francs ($80 billion) of goods to the United States last year, or about one-sixth of its total exports, giving it a goods trade surplus with the US of almost 38.7 billion francs. In services, it had a deficit of nearly 20.4 billion francs.

The US is Switzerland’s top foreign watch market, accounting for 16.8 percent of exports, worth 4.4 billion francs, according to the industry federation.