Zug’s success story isn’t a given

How is Zug’s economy faring in times of global uncertainty? Silvia Thalmann-Gut, Director of Economic Affairs, discusses wars, crises, and tariffs—and why she still believes in the region’s economic potential.

Interview: Tobias Söldi
 

Ms. Thalmann-Gut, you took office as Zug’s Director of Economic Affairs in 2019 - before the coronavirus pandemic, the wars in Ukraine and the Middle East, and also before Trump’s second term. How has your daily work changed since then?
Silvia Thalmann-Gut: Maintaining contact with representatives from business and politics, and collaborating with my management team, has intensified. In times of crisis, there are no ready-made solutions that can be pulled out of a drawer. Rather, one must engage in dialogue, analyse the situation, and explore ways to respond. This continues to form a solid foundation for my work.

Do you sometimes wish things were calmer?
I'm glad we've put the Corona pandemic and the energy shortage behind us and that things are back to normal. But I'm also aware that we can never rest on our laurels. We must always be ready to react to changes. Zug's successful model isn't a given.

Wars, crises, tariffs: is the economic location of Zug struggling under the current global situation?
Because we're internationally oriented, we quickly feel the effects of international disruptions. We've seen this in the past. This is evident, for example, in the unemployment rate in the Canton of Zug, which is then typically higher than usual.

Is it the same now?
Yes. At the end of October, unemployment was at 2.7%, compared to 2.5% a year ago. That's not particularly worrying: the unemployment rate in the Canton of Zug is currently below the Swiss average of 2.9%. What we also notice in times of global uncertainty is that companies are more cautious. They’re thinking more carefully about how they invest. But this isn't just the case in the Canton of Zug, but throughout Switzerland. The State Secretariat for Economic Affairs (SECO) confirms this.

The tariffs announced by US President Trump were a shock to the economy, though they have since been at least partially averted. People in Zug seem to be taking it in their stride, as evidenced by the response of the government council (Regierungsrat) to an inquiry on the topic. Is the Zug economy so resilient to crises?
The primary impact is rather minor, because we have little industry in the Canton of Zug that exports to the USA. The number of short-time work compensation claims (Kurzarbeitsentschädigungen) would provide an indication of any potential problems in the economy. So far, we have received very few applications citing "US tariffs" as the reason. In contrast to the Swiss franc shock, which affected all of Switzerland and all sectors, the US tariffs have had a much greater impact on individual sectors – for example, the machinery, electrical, and metal industries – and thereby also on specific locations.

Also noteworthy: With the OECD minimum tax, the tax privileges that Zug makes available for large companies will be eliminated.
We must maintain our attractiveness. That's why we drafted the Business Location Promotion Act (Gesetz für Standortförderung), which will be put to a vote on 30th November. With this, we've found an approach to responding to the OECD Minimum Tax: we directly support companies with subsidies in the areas of innovation and sustainability. The idea that companies receive something when they demonstrate certain activities is an unfamiliar system to us, one we didn't seek.

Away from tax advantages, towards subsidies.
Yes, this is a paradigm shift.

Silvia Thalmann-Gut, Director of Economic Affairs                              Photo: Dominik Wunderli
 

With regard to the OECD minimum tax, an article in "Magazin" from 2024 also stated: "The Zug model seems to be only a referendum, a tax harmonisation, an international regulation, rather than being seriously shaken." Would you agree with that?
Not at all. The Canton of Zug can look back on a long period of political and economic stability. International companies appreciate this, as well as other aspects, such as the attractive tax environment, the short distances, the business-friendly and service-oriented atmosphere, skilled workers, education, and a convenient location with airport access. We are building on these strengths and making them more visible.

What if a large company decides to relocate from Zug? A scenario that doesn't seem entirely far-fetched in today's globalised economy.
Of course, that would be a loss. But I am convinced it would also create opportunities for other companies operating in the same sector. Furthermore, Zug's economy is not dependent on a single company or industry, but is highly diversified – and this also contributes to our success. We have various clusters, for example, in the high-tech industry, life sciences (including pharmaceuticals, biotech, and medtech), financial services, and IT.

The unpredictable policies of the Trump administration have fuelled the debate in Switzerland about its position in Europe and its relationship with the EU – a debate that is already in full swing in connection with the upcoming vote on the EU trade agreement (Vertragspaket). From Zug's perspective, what place should Switzerland actually occupy in Europe and the world?
Europe is our most important trading partner. As a small economic hub, we depend on well-regulated relations with the EU. The Zug cantonal government therefore views the agreement package with the EU positively – even though there are some aspects that, in our view, need improvement. Alternative sales markets are also important, and the federal government (Bund) has a responsibility here, for example, by renewing the free trade agreement with China.

The war in Ukraine has now been raging for about three and a half years. How has this situation affected the economic location of Zug over the years?
Supply chains were partially disrupted by the outbreak of the war, leading to significant disruptions. Some companies were temporarily unable to continue their production without restrictions due to a lack of certain components, although the situation has largely stabilised in the meantime. The war has also had a significant impact on asylum procedures.

The war in the Middle East has been a global concern since October 2023, and the current ceasefire is fragile. Has the war also affected Zug?
In my perception, the impact is less pronounced there, simply because economic ties to the region are less developed.

Global crises are also affecting the population, with inflation being a prime example. Moreover, the housing shortage and the displacement of long-time residents are major concerns for the people of Zug. How much confidence does the population actually have in Zug as a business location and in the economic policies of the canton?
I have the impression that the population has a high level of confidence in the performance of the canton. But we can't deny that our success also brings challenges - with housing and transportation being our biggest concerns. Finding solutions isn't easy, and these problems can't be solved overnight.

Isn't a gap opening up between the needs of businesses and those of ordinary Zug residents?
You can feel a sense of growth fatigue among the population. We're aware that Zug's growth has been very rapid, and it’s therefore clear to the cantonal government that growth needs to be slowed down so that infrastructure can keep pace.

What does that mean in concrete terms? Does the Canton of Zug want to make itself unattractive?
No, we want to remain attractive – we still answer the phone by the third ring at the latest. The focus is on economic development: we want the companies that are based here to develop and grow sustainably within the canton - we’ve placed great emphasis on this for years. But of course, if a company is considering relocating to Zug, we will do everything we can to support this.