IBACH, Switzerland (Reuters) -Swiss Army Knife maker Victorinox is trying to hold down its U.S. prices, while exploring new markets, as it experiments with new tools to navigate President Donald Trump's trade tariffs. 

Popularised in the United States by soldiers who were based in Europe after World War Two, the distinctive red-and-silver multi-tool is made at a factory in Ibach, central Switzerland.  

There, rolls of stainless steel are punched into blades, which are rounded with abrasive ceramic stones and baked at more than 1,000 degrees Celsius before being sharpened.

Victorinox, which produces 10 million Swiss Army Knives a year alongside kitchen and commercial knives, watches and luggage, is one of many Swiss manufacturers worried about the higher cost of doing business with the United States.

Trump imposed tariffs of 39% on imports of goods from Switzerland in August in a bid to cut the U.S. trade deficit with the country.

"If the tariffs stay in place, that's an exceptionally challenging situation," said CEO Carl Elsener, whose great-grandfather founded the company in 1884, adding the higher levy would cost Victorinox some $13 million a year.

The U.S. accounted for around 13% of Victorinox's 417 million Swiss franc ($519 million) sales in 2024 and if the 39% tariff stays in place every product it ships to the U.S. will lose money, Elsener told Reuters.

Victorinox has responded by sending extra stock to the U.S. to build up inventories and pushing efficiencies at its Swiss plants. It is also considering doing some polishing and packaging work in the U.S. to lower its cost at time of import.

"We are trying to reduce our dependence on the U.S. market by trying to expand more strongly in other markets like Latin America and Asia," Elsener said of Victorinox, which has around 100 U.S. staff in sales, marketing and logistics.

AVOIDING US PRICE HIKES

Family-owned Victorinox is not alone in feeling the pinch.

A survey last month by the Swiss Mechanic trade body showed 45% of Swiss small- and medium-sized manufacturing companies had experienced lower order intakes since the U.S. tariffs.

Swiss firms' profit margins are already being eroded by a 12% rise in the franc against the dollar this year.

Novartis and Roche are among those potentially in the firing line if the tariffs extend to drugmakers, while Swiss watchmakers like Omega-owner Swatch Group, as well as food giant Nestle, which exports Nespresso capsules, are already being hit.

"Our priority is to defend market share while the situation is so unpredictable," said Elsener, adding: "Our investment in the United States right now is to avoid price increases and accept the losses - that's our sacrifice to keep market share."

Victorinox sent two extra 40-foot containers with about 200,000 Swiss Army Knives, plus 200,000 kitchen and commercial knives, to the United States in February and March. 

That should mean it has sufficient stock in the U.S. until the end of this year, and up until March for some products, and be able to keep prices there steady into 2026.

MAKING SWISS ARMY KNIVES ABROAD 'NOT AN OPTION'

Victorinox - which is raising some targeted prices - is accelerating automation and efficiency programmes at its Ibach facility, where 25 members of the family still work. 

It considered moving some production to the United States or elsewhere in Europe to lessen the tariffs impact, but ultimately decided against this because it lacks the scale, Elsener said.

Instead, it is looking at limited end-of-line work in the U.S. - such as cleaning and packaging of commercial knives - to cut the dutiable value, he added.

What it cannot do is make its products elsewhere, as to qualify for the coveted Swiss-made label, at least 60% of manufacturing costs must be in Switzerland. 

"Producing the Swiss Army Knife abroad is not an option," said Elsener, adding the brand depends on its Swiss heritage. 

Nevertheless, he is confident for the future.

"We got through the First World War, the Depression, the Second World War, the global economic crisis, the oil crisis," he said. "This is just the latest challenging situation, which I'm confident we can overcome." 

($1 = 0.8034 Swiss francs)