[F]Trump’s new tariffs shake up the Swiss watch industry

Most of my colleagues and industry have been in Geneva, enjoying watches and wonders, and enjoying the sights and sounds of the biggest fair of the year, I have been watching from home this year. I welcomed my eldest son into the world and moved the house within two weeks (obviously, I’m a big eater for punishment, but I’m off track). As a result, I didn’t rush from meeting to meeting all day, so I had time to digest the wider world news. One such story that dominated the news is Trump’s introduction of new tariffs on global exports to the United States. The initial response to these was… negative to say the least.

It all began with a thunder of finance. Stock markets around the world fell sharply after President Donald Trump’s tariff announcement. The US S&P 500 Index has surged nearly 5% in a day, wiping out roughly $2 trillion in market value for businesses around the world. The gorgeous European stocks continued to slip sharply as investors tackle the news. It was the worst day on Wall Street since 2020, and the reaction was felt from New York to Tokyo (here and in Manchester in the rain). This dramatic market response highlights how important Trump’s new trade measures are. Not only is it big technology and automobiles, it is one of the luxury watches that is Switzerland’s most proud export industry.

Happy Rebate Day, everyone!

At the heart of the confusion is a sweeping set of import tariffs revealed in what Trump called his “liberation day” trade policy speech. The plan imposes a comprehensive 10% tariff on all US trading partners at a sudden “mutual” additional charge on certain countries. Switzerland has withdrawn a large 31% tariff on US-bound goods, the highest rate among its US allies. In comparison, the European Union faces 20%, the UK faces 10%, and China faces a whopping 34%. The news of these unprecedented tariffs (the best US import duties in almost a century) quickly surprised investors who feared a global trade war and rising consumer prices. In the midst of chaos, the Swiss watchmaker suddenly got caught up in the middle of international trade politics.

Swiss watch caught in a crossfire

The United States is essential to Switzerland’s renowned watch industry. The US has recently become the number one market for Swiss watches, accounting for around 16.8% (valued at around 4.4 billion francs) of Swiss watch exports. Looking at it, almost one of every six francs the industry has acquired from exports comes from American collectors and consumers. Therefore, this tariff bomb lands straight at the gateway of a Swiss watch.

From our understanding, if Swiss watch brands ship goods to the US for further distribution, customs duties apply to the export price of the watch (not retail or wholesale price). However, if you purchase a watch directly from a Swiss dealer, a 31% tariff applies to the selling price (excluding Swiss VAT). In the latter case, the watch costs almost a third of the time it reaches an American buyer. For example, watches sold for 20,000 times (approximately $23,000) earn around 6,000 chf with additional import duties. In both cases, Swiss watches will be a much more expensive dul for American collectors than last week.

Of course, Swiss watch sellers and distributors are on guard. The deal is now in scope as US clients are naturally balking with sudden price increases. If retailers decide to raise sticker prices to cover tariffs, they risk suffocating demand. However, if you try to absorb costs, your already thin profit margins will grow to breakpoints. Buyers in these layers tend to be price sensitive and have less cushioning in brand margins, so this squeeze is expected to be the most difficult to monitor in entry-level and mid-range Switzerland. Even at the high end, math is difficult. In short, whether you’re an independent boutique or a famous house, selling Swiss watches to Americans has become a much more complicated equation.

Apply the party brake for a week

It’s time for an announcement to tear industry anxiety. The news broke in the middle of the clock and wonder. A week of champagne toast and optimistic contract production quickly became gloomy. The executives behind the lack of natural sunlight, brightly lit booths and newly hyped clocks were worried about the future.

Many wanted the watch sector to dodge tariff bullets. After all, unlike cars and electronics, there is virtually no mechanical watch production in the soil of the United States. In other words, impose heavy taxes on Swiss watches does not magically boost the American watch industry. It simply makes authentic Swiss articles more expensive for Americans. The reality was confusing and worrying Swiss insiders. The meeting with US partners reportedly was cancelled at the show, and uneasy tensions are hanging over the debate. It’s a bitter twist. Switzerland celebrates its watchmaking legacy on its global stage. Trade policy moves from Washington cast a long shadow on the festival.

Important markets are currently at risk

Why does this tariff sting so much? The Swiss watch industry has been brought to American demand in recent years. After the pandemic shock, US sales rebounded strongly in 2024, increasing by around 5%, supporting Swiss export figures. In contrast, the once-present Chinese market is declining. Swiss surveillance freight to China plummeted more than 25% last year amid economic struggles. In fact, US consumers are picking up the sagging left behind by the cooling Asian market. Swiss watchmakers from luxury brands such as Rolex, Patek Philippe and Vacchelon Constantine have benefited from Americans’ continued appetite for Swiss watches, from volume brands such as Longines and Tissot. At present, 31% tariffs threaten to attenuate US demand, so critical lifelines are at risk.

Much greater than millions of large brands’ financial resources

The wider impact has not only lost this quarter this year, but simply lost sales. If US consumers cut back on purchasing new Swiss watches (or American retailers cut orders for higher costs), Swiss manufacturers can see inventory build up and cash flow tightening. Smaller suppliers and component manufacturers (ecosystems of part-makers feeding major brands) are already feeling uneasy as some US clients have suspended their projects.

There are also retaliatory moves and threats of long-term trade wars. The Swiss government has expressed its commitment to free trade and suggests consultations and pursuit of legal relief, but resolutions may take time. In the meantime, Swiss watch companies will need to decide how to deal with it. Some refrain from planned investments and expansions. Others may quietly adjust their pricing strategies. Perhaps if the US segment slows dramatically, it could introduce price increases globally to spread the impact or prioritize other markets. The risk is that the tariff-driven slump in one of their top markets could knock the industry’s post-management recovery off the course, just as it was when it was beginning to stabilize.

Where there is a will, there is usually a way

It is worth noting that luxury watch buyers are passionate bundles. Stubborn collectors don’t simply abandon their hobby because of customs. There may be more creative workarounds, such as an increase in the purchase of watches already owned in the US, or picking up overseas watches to take them home abroad. However, such adjustments should take time and do not completely offset the hits in new watch sales.

What’s more worrying is the psychological effect. Trade tensions and market volatility could adopt consumer trust. If tariff intensification slows global economic growth, Fallout will hurt all luxury sectors, including Swiss watches. The US market is important for the health of Swiss watchmakers, especially as China’s outlook is uncertain. Geneva’s nervous mood reflects the perception that this issue is beyond a temporary blip. It challenges industry game planning in the near future.

Navigate uncertain times

So where does the Swiss watch industry go from here? In the short term, all eyes are in diplomatic efforts and indications that these tariffs could be rolled back or negotiated. History shows that broad tariffs are double-edged swords, often hurting industry and consumers on both sides of the border. Swiss officials and industry groups lobby hard for exemptions and quick resolutions, highlighting the luxury watch trade has long benefited both the Swiss economy and American retailers and collectors. In the meantime, Swiss brands will need to adapt.

Before it officially takes effect on April 9, we may delay shipments to the US until the brand is clarified or we have a quick track of some delivery. The pricing strategy will be revalued. Some companies may temporarily absorb some of their costs to satisfy their US partners, while others can accept lower quantities in exchange for preserving margins. Choosing is not easy, each one comes with its own risks.

Final Thoughts on Trump’s tariffs and their potential impacts

What’s clear is that the Swiss watch industry is in a challenging chapter that is rarely seen. When global supply chains recovered from the pandemic and demand recovered, geopolitics threw another curveball. But if there is a silver lining, that’s the resilience that the industry has shown over and over again. Swiss watchmaking has overcome the chaos from the world war, quartz technology, the pandemic and the economic crisis. Tariffs are painful, but another hurdle to overcome through ingenuity and patience. As the situation unfolds, expect conversations in Switzerland’s boardrooms and workshops to revolve around maintaining agile, encouraging enthusiasts, and maintaining tariffs. After all, the appeal of finely crafted Swiss watches is not easily darkened by politics.

Now, where are you standing on this topic, especially for the US Fratelli? Are Trump’s tariffs a temporary, intense, temporary, or a long-term game-changer for the watch world? How do you think the Swiss industry should respond? Share your thoughts and discuss them in the comments below!