The trade surplus contracted in July to 4.591 billion Swiss Francs from a revised 5.725 billion in June to is its second lowest level this year, with exports declining for the third consecutive month. The chemical and pharma sector is weighing heavily on both sides of the trade ledger.

Switzerland sent 23.2 billion worth of goods abroad in July, a 4.0 percent drop from the previous month, to their lowest level this year, suggesting continued tariff effects. Imports were down 3.3 percent to 18.6 billion Francs, marking the second decline this year.

Chemical and pharmaceutical exports fell 2.7 percent in July in real terms to 22.2 billion Francs, with the pharmaceutical sector so far having been spared US tariffs. In June, exports were up 7.3 percent after a 6.9 percent drop in May.

Surprisingly, watch exports rose 6.9 percent in July to 2.3 billion Swiss Francs, most likely due to stockpiling ahead of the 39 percent tariff rate that will bite in August.

Exports to the US, very volatile in recent months, rose 1.1 percent in July to 4.02 billion Francs, following a 25.2 percent increase in June and a 43.7 percent drop in May. After being unchanged in June, imports from the US fell 7.9 percent to 1.05 billion Francs.

The July data don't paint a rosy picture for Swiss trade, and the August data to come will give the first complete indication of how the tariffs are hitting the economy. To date, there are no strong indications a deal is in the works with the US.

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.