After reaching a record in April, Switzerland's trade surplus came in at 3.381 billion Swiss francs in May as exports of pharmaceuticals and chemicals dropped by 2.6 billion. Nominally, exports fell 6.4 percent to 23.3 billion francs, with exports increasing 1.9 percent to 19.469 billion.

The US tariff policy is biting hard. Exports to the US fell by 41.7 percent to 3.172 billion francs in May after contracting 42.5 percent in April. In March, the exports stood at 9.468 billion, and while certainly due to stockpiling ahead of the full imposition of tariffs, the Swiss export industry is facing strong headwinds.

The Swiss watch industry also suffered heavily in May, with exports falling 21.1 percent to 2.0 billion, climbing down from a record 2.535 billion the month before. At the same time, precision instrument exports fell 10.1 percent in May from April to 1.39 billion francs, led by a 13.8 percent contraction in medical instruments.

Today's results show the US tariff policy is starting to cause pain for the Swiss export sector. The Swiss National Bank which meets later this morning is expected to cut interest rates to zero from 0.25 percent, partially due to a strong Swiss franc. Still, the damage is being done.

The merchandise trade balance measures the difference between the total value of Swiss merchandise exports and imports. The focus is on the balance of trade in goods, excluding precious metals, gemstones, works of art and antiques. This is provided in unadjusted and seasonally adjusted measures for cash and volume.

Changes in the level of imports and exports along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect the value of the Swiss franc in the foreign exchange market. Switzerland's major trading partners include Germany, France, Italy and the United States. While Switzerland still exports large amounts of traditional products such as chocolate and watches, more than half of Swiss exports are in mechanical and electrical engineering and chemicals today. A positive trade balance indicates a trade surplus while a negative balance represents a trade deficit. Trade surpluses indicate that foreigners are buying more Swiss goods, which are typically paid for in Swiss Francs. This translates into greater demand for the currency and upward pressure on the value of the Franc. However, if the balance is a deficit, Swiss consumers are buying goods from trading partners which translates into higher demand for foreign currencies placing downward pressure on the value of the Franc.