Swiss Watch Industry Grapples with New US Tariffs

The Swiss watch industry is facing a significant challenge as new tariffs imposed by the US administration, led by President Trump, came into effect this week. Despite last-minute diplomatic efforts by Swiss leader Karin Keller-Sutter, a 39 percent levy is now applied to all Swiss watch exports, including luxury brands like Rolex, Omega, and Patek Philippe, entering the United States.

This development is poised to severely impact Swiss watchmakers, as the US represents their largest export market, accounting for approximately 17 percent of total export value. In the first half of this year alone, exports to the US reached 2.6 billion Swiss francs ($3.2 billion). Many individual watchmakers, both large and small, rely even more heavily on the American market.

The critical question now is who will bear the brunt of these increased costs. While initial tariff threats saw brands, retailers, and consumers share the burden, leading to average retail price increases of 3-5 percent, the current 39 percent tariff is nearly four times higher. Industry leaders, including Nicholas Hayek Jr. of Swatch Group, have indicated that absorbing such a significant cost within profit margins is unsustainable, especially given a reported 11.2 percent sales slump in the first half of the year for his company. Major players like Richemont and LVMH are facing similar struggles.

Consequently, further price hikes are anticipated not only in the US but potentially globally, as brands seek to maintain balanced pricing across markets. This comes at a time when global demand for Swiss watches is already declining, with export values dropping 9.5 percent in May and 5.6 percent in June. Exports to the US were particularly hard hit, though figures were skewed by a surge in pre-tariff shipments in April.

Critics argue the tariffs are unwarranted, noting the absence of a comparable US high-end watch manufacturing industry to protect. Hundreds of American watch businesses that rely on Swiss imports are expected to suffer. While the Swiss pharmaceutical industry, a much larger export sector to the US, remains exempt, Swiss watchmakers are constrained by ‘Swiss Made’ regulations requiring 60 percent of value to be added domestically, preventing them from easily relocating production. The future remains uncertain, with the possibility of a policy reversal by the US administration, though for many Swiss watch companies, the current trajectory could spell disaster.

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