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(Bloomberg) — Swiss stocks dropped as the market reopened after a holiday, on worries about the impact from US President Donald Trump’s punitive 39% export tariff and a push for drugmakers to lower prices.

The Swiss Market Index fell as much as 1.9% Monday, although it pared declines to 0.88% as of 10:15 a.m. in Zurich on optimism that the levies will ultimately be a tool to drive trade negotiations. The benchmark is now up about 1% for 2025.

Drugmakers Novartis AG (NVS) and Roche Holding AG (RHO5.MU), which account for almost 30% of the index, dropped 0.7% and 1.4%, respectively. UBS Group AG declined 1.8%, while shares of Cartier owner Richemont SA fell 0.7%. London-listed Watches of Switzerland Group Plc (WOSGF) rebounded 2.7% after slumping 6.8% on Friday.

The Swiss franc fell for a second day against the euro, sliding 0.3%. It had weakened 0.5% on Friday, the biggest drop since May, after Trump’s announcements late last week. The equity market was closed Friday.

“Despite the shock caused by the announcement of the new tariffs, the initial fall in the Swiss market may only represent a transitional phase,” said John Plassard, head of investment strategy at Cite Gestion. “Recent history has shown that external shocks, however violent, rarely cause lasting damage to the Swiss economy.”

European stocks dropped on Friday by the most since April after Trump unveiled the broad slate of levies, including on Canada, New Zealand and South Africa. The president also sent letters to 17 of the world’s largest drugmakers, insisting they immediately lower what they charge Medicaid for existing drugs.

Switzerland, known for its luxury watches, rich chocolates and banking giants, is one of the US’s biggest trade partners. Last year, it exported more than $60 billion of goods to the US, including medical devices and Nespresso coffee. Pharmaceuticals are also a key export and one of the main reasons the Alpine nation has a $38 billion bilateral trade deficit with the US.

Risks to Pharmaceuticals

Drugs are exempt from the new tariffs for now, but Swiss officials said the sector will still be burdened and could face separate levies. Both Roche and Novartis have been making overtures to the US, pledging in recent months to invest more than $70 billion in research, manufacturing and distribution in the country to address the Trump administration’s concerns about local production.

Roche’s US subsidiary, Genentech, and Novartis were also among the 17 drugmakers to receive the letter from Trump last week. He also asked them to guarantee future medicines be launched and stay at prices on par with what they cost overseas.

“Even if pharmaceutical products are exempt from tariffs for the time being, the US government is putting the global supply of innovative medicines at risk,” Interpharma, which represents the Swiss industry, said Friday. “This also affects research-based pharmaceutical companies in Switzerland and the supply in Switzerland.”

After a strong start to the year, the Swiss Market Index has trailed the Stoxx Europe 600 partly due to its heavy exposure to defensive stocks. Investors have instead piled into so-called cyclical sectors on optimism around resilient global economic growth.

If the US tariffs are confirmed, it will mean Switzerland has the fifth-highest tariff worldwide, after Brazil, Syria, Laos and Myanmar. It will also be significantly more than the European Union and the UK.

“What we’re facing this week in Switzerland is very similar to what happened at the beginning of April with the first announcement of US tariffs,” said Arthur Jurus, head of the investment office at Oddo’s private wealth management unit in Switzerland. “Visibility on tariffs, notably on what will apply further down the road on pharmaceuticals, is a real problem.”

“That said, counter-intuitively, the safe haven provided by the Swiss franc might edge off some of the pressure on the equity market,” he said.

—With assistance from Julien Ponthus, Allegra Catelli, David Goodman and Naomi Kresge.