In 2003, with overwhelming popular support, the Swiss Federal Council inscribed the debt brake in the Constitution. Since then, the debt brake has been praised for its effectiveness in reducing the national debt and its flexibility, allowing for countercyclical measures. Today, Switzerland is facing a dual crisis. First, the introduction of tariffs on Swiss imports by the United States threatens the Swiss external sector and, by extension, the broader economy. Second, following extraordinary spending during the COVID crisis, the Federal Council is planning to implement austerity measures and to run sustained surpluses in accordance with the debt brake. This thesis aims to evaluate if Switzerland’s fiscal space is appropriate to withstand the external shock following the US tariffs under the current fiscal rules. This is approached through a sectoral view of the national economy. By taking a Stock-Flow Consistent approach, we show the link between the private, public and external sectors of the economy. Accordingly, we demonstrate the unsustainable nature of fiscal rules, and in the Swiss case, its dependence on strong net exports. In order to test the sustainability of Swiss fiscal space, we take two complementary perspectives. First, staying within the confines of the debt brake, we review the government budget forecasting methodology, and discuss its limits. Accordingly, we reassess Switzerland’s potential output through a proposal to reintegrate discouraged workers into the labour force. We find that despite the available space for fiscal expansion and economic growth, the federal government is restrained by the debt brake. In a second time, we run simulations to assess the impact of the tariffs on the Swiss economy under various scenarios. This method allows us to compare macroeconomic outcomes under the two paradigms of public finance. Under the sound finance paradigm, the federal government is bound to run fiscal surpluses, whereas under the functional finance paradigm, it is allowed to run deficits. We study the effects of shocks and fiscal expansions of various magnitudes. In essence, this simulation confirms our previous findings and shows the considerably stronger economic outcomes under a functional approach to public finance. Thus, we conclude that our findings support the view that Swiss fiscal space is restricted under current fiscal rules and is not appropriate to withstand pressure from external shocks. We support the argument that a change of paradigm is necessary to avoid the likely economic downturn caused by the ill-fated combination of the deterioration of trading conditions and austerity measures.