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KMU Magazin No. 6, June 2023 Switzerland and the USA: "Never bet against America

Warren Buffett believes in the American dream, and in Berkshire Hathaway's 2021 annual shareholder letter, Buffett immortalizes his adage to "never bet against America." And that's in the midst of the pandemic - either manic American optimism, a bold statement from an investment genius, or a bit of both.

America is flourishing, and with a gross domestic product of almost 25.5 trillion US dollars in 2022 (according to Statista), this makes the USA by far the largest economy in the world. Many believe the country will be able to defend this top spot for longer against its biggest competitor, China (2022 GDP $18.1 trillion), despite all the global and domestic difficulties.

The dollar remains the world'sglobal currency, and the New York Stock Exchange and also the tech exchange Nasdaq dominate the global financial world with a combined trading volume of about $57 trillion. Perhaps that's why the king of investors Warren Buffett says, "Never bet against America."

Buffett wrote further, saying, "Success stories abound throughout America. Since our country’s birth, individuals with an idea, ambition and often just a pittance of capital have succeeded beyond their dreams by creating something new or by improving the customer’s experience with something old. "

Success Story Switzerland

It seems the Swiss, who also have a reputation as savy investors, have long since followed Buffett's advice either consciously or unconsciously. Swiss companies are experiencing a boom in the U.S. and the two economies are bringing success to one other. Trade between the two countries has developed dynamically.

For the first time in 70 years, according to the Swiss Federal Statistical Office, Switzerland's most important export market in 2021 was no longer Germany, but the USA. With exports worth 57.7 billion Swiss francs, the USA became the most important export destination for Swiss goods.

The United States is also Switzerland's most important destination for Foreign direct investment (FDI) - more important than Germany, France, Italy and the United Kingdom combined. With direct investment of $300 billion, Switzerland ranks 7th among foreign investors in the United States.

In addition, Swiss companies directly create half a million jobs in the United States. Conversely, Switzerland imported goods worth $22.2 billion from the United States in 2021. The approximately 1100 U.S. companies in Switzerland employed nearly 100,000 workers.

The Swiss are coming

Our law firm, which operates nationally and also internationally with the US Desk and the German Desk, is at home in Central Switzerland. Similarities between "Middle America" and Central Switzerland are obvious: quality, hard work and self-responsibility are emphasized and strengthen this bilateral relationship.

These bilateral relationships go back a long way and are building blocks on the road to future success. One of the authors knows such success stories personally, as they take place in her home state of South Carolina.

At the beginning of 1960, two Swiss textile machinery manufacturers, Rieter and the Sulzer brothers from Winterthur, made Spartanburg in the state of South Carolina their American

Headquarters. These Swiss pioneers were convinced that the advantages of having a sales and service office close to their customers would be the key to success - a risk that paid off then and now. Other European companies such as Hoechst, BMW, Michelin, Rhone-Poulenc and Ciba-Geigy followed.

The consideration of being close to the customer still pays off and is also noticeably the main reason for recent investments by Swiss companies in the USA. Take, for example, the Swiss Krono Group, the global giant in laminate flooring and building products, headquartered in Barnwell, South Carolina. Swiss Krono produces about seven football fields of laminate flooring a day - that's 2555 football fields a year. The company's initial investment in Barnwell was in 2005, followed by a $45 million expansion and the most recent $230 million expansion in 2016.

According to Martin Brettenthaler, CEO of the Swiss Krono Group, the following considerations were the basis: "Barnwell is the perfect location: there is enough space to set up an excellently functioning production, the wood supply is secured, there are excellent conditions for logistics and a highly qualified workforce on site. The investment in 2016 was the logical consequence of the further development of the site in order to adapt the company to the expectations and requirements of the market."

Brettenthaler also emphasizes the importance of the foreign direct investment in South Carolina: "the Barnwell location is expected to play a key role in the company’s global expansion. According to the motto: Think global, act local, our local production allows us to reach and serve our customers in the U.S. much better and thus adapt more flexibly to their needs. At the same time, local production also allows us to be more environmentally responsible by avoiding imports, for example. "

Pilatus Aircraft Works Ltd. also made headlines last year when it acquired Skytech, its longtime aircraft sales and service center with locations in Rock Hill, South Carolina, and Baltimore, Maryland. With Pilatus Business Aircraft Ltd, Pilatus Flugzeugwerke AG has also had a subsidiary based in Colorado for 26 years. With this recent 2022 acquisition, Pilatus expanded its US footprint and has strengthened its position in the North and South American markets.

Between Trump and Biden

In a previous "KMU Magazine" article from 2018, we wrote that with the enactment of the Tax Cuts and Jobs Act (TCJA) on December 22, 2017, the most significant tax reform since the Reagan era became a reality in the United States.

TCJA was primarily intended to strengthen the competitiveness of U.S. companies on the world market and at the same time boost the U.S. economy. The main elements of the Act are above all the reduction of the corporate tax rate from the current 35 percent to 21 percent, the introduction of immediate tax deductibility of acquisition costs for certain assets and the restructuring of international tax law. While the tax changes for individuals are limited in time until December 31, 2025, the changes in group tax law are unlimited in time.

People often ask if Trump's tax reform is still in effect. The simple answer is yes. Trump's Tax Cuts and Jobs Act (TCJA) is still in effect. While some changes to the tax code have been proposed since the passage of the TCJA, such as President Biden's proposed "American Jobs Plan" and the "American Families Plan," none of these proposals have yet been signed into law. Therefore, the TCJA remains the current law of the land when it comes to federal taxes.

Possible tax changes

The Biden Administration's proposed "American Jobs Plan" and "American Families Plan" would have a significant impact on taxes if they became law. Some of the proposed tax changes include:

  • Increase the corporate income tax rate: The American Jobs Plan proposes to increase the corporate tax rate from 21 percent to 28 percent. This would partially reverse the corporate tax rate reduction made by the TCJA in 2017.
  • Raising taxes on high-income individuals: The American Families Plan proposes to increase the top marginal tax rate from 37 percent to 39.6 percent and apply that rate to individuals earning more than $400,000 per year. It also proposes to increase the capital gains tax rate for individuals with annual incomes of more than $1 million.
  • Closing tax loopholes: It is proposed to close various tax loopholes, including those related to real estate, and to improve the enforcement of tax laws.
  • Raising taxes on multinationals: The plans propose raising the minimum tax on foreign profits of U.S. companies and making it harder for multinationals to shift profits to low-tax countries.

It is important to note that these proposals have not yet been signed into law and the details may differ from the current proposals. In addition, the proposed tax changes may face opposition and may need to be negotiated in Congress. For the plans to take effect, they must be passed by both the House and Senate and then signed by the President. Democrats currently hold slim majorities in both chambers of Congress, which could make it easier to pass the plans through a budget reconciliation process, although that process also has its own limitations and requirements.

Ultimately, the fate of the American Jobs Plan and the American Families Plan will depend on the political negotiations and compromises that take place in Congress in the coming months.

Export and investment

Another legislative milestone affecting exports and investment, the Infrastructure Investment and Jobs Act (IIJA), was signed into law on November 15, 2021, and provides for approximately $550 billion in new spending (about $1,700 per person in the U.S.). This is the highest level of government funding for infrastructure in over a decade. Together with existing funds, the IIJA will provide $1.2 trillion over the next ten years for projects such as roads, bridges, mass transit, broadband and clean energy.

IIJA funds are administered by different federal agencies depending on the program or project. Because roads and bridges account for the majority of funds, the Department of Transportation (DOT) has the greatest oversight of IIJA funds, but other agencies also are responsible for various infrastructure projects:

  • Broadband infrastructure projects are promoted by the Federal Communications Commission.
  • Water infrastructure, including drinking water and wastewater system upgrades, is managed by the Environmental Protection Agency.
  • Energy-related projects, including charging stations for electric vehicles and the modernization of the national power grid, are led by the Department of Energy.
  • The development of regional innovation strategies to promote economic growth through innovation and entrepreneurship is overseen by the Department of Commerce.

Swiss CEOs, business leaders and companies welcome President Biden's plan and see it as a long-term investment opportunity. In The Business Report's article Swiss Direct Investment Supports U.S. Economy, Jan Jenisch, CEO of Holcim, signals that the U.S. is a priority for opening new factories and new product lines. Oerlikon is another company that sees the U.S. as an important market.

According to Oerlikon’s CEO Roland Fischer the company has a number of investments in the US, ranging from a $55 million production plant in North Carolina to a $50 million finishing plant in Michigan. Oerlikon already has 32 offices and 1,200 employees in the US and hopes to engage bilaterally and multilaterally on issues including data protection and tax.

"Buy American" is also part of the IIJA and aims to promote the use of goods, products, materials, and services manufactured or provided in the United States, to be given preference. These conditions are important for public tenders for infrastructure projects that are co-financed with federal funds. Now, not only iron, steel and industrial goods are covered by the regulation, but also other sectors and materials such as non-ferrous metals, polymers, fiberglass and materials used in wood and drywall construction, for example.

In construction and electric vehicle industries, there has already been initial pushback and calls for ex-emptions and waivers. The argument is that the disruption to the supply chain caused by the pandemic has driven up the cost of construction materials and made project delivery dates and product availability more uncertain. The proposed Standards are being developed by the Office of Management and Budget and would allow federal agencies to waive procurement requirements in certain cases when U.S.-manufactured materials are not available or the cost is too high.


Although the new legislation has met some resistance, and even though not all hurdles have yet been overcome, the US government continues to promote jobs and growth in American industry. Swiss companies are well-equipped and well-advised to take advantage of this opportunity and to always bet on America.

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