Swiss watchmakers and their retail partners have seen it all over the past century or more: two world wars, the great depression, dotcom’s boom and bust, the global financial crisis and covid.
They draw on these experiences as they make plans for years, perhaps decades into the future.
Seen in this context, the likely imposition of an additional 29% tariff on Swiss watches entering the United States, on top of the current 10%, is a challenge, but far from an existential threat.
It will require a recalibration of prices, most likely in the US and around the world, tweaks to margins for everybody and, probably, higher customer acquisition costs as price rises trim demand that will also eat into short term profits.
This would set a new baseline in prices, and the hope will be that the enduring desirability of Swiss watches, somewhat boosted by increased demand for hard assets that hold their value at a time of financial uncertainty, will be maintained or return to growth.
Plus, China might come to the rescue as the fallout from its property market collapse unwinds.
Lest we need reminding, fluctuating demand over the past two years has barely touched Rolex, Patek Philippe, Audemars Piguet and Richard Mille, which still have waiting lists for most collections.
This, and over-retail secondary market prices, suggest clients for these privately-owned brands are not particularly sensitive to price increases.
It is tougher for the publicly-listed watchmaking groups that are, by their nature, under a little more pressure to perform quarter-to-quarter.
However, the family-controlled structures of these luxury conglomerates give them sufficient grip to make long-term decisions regardless of how short-termist shareholders might complain.
Swatch Group shows this in its strategy of keeping its entire watchmaking workforce fully employed and paid throughout the recent downturn, when many competitors were making redundancies or using short term working support payments from the government.
The company argues it will take the hit to its margins (operating profit was down from 6% last year to just over 2% in the first half of 2025) because it will be best-placed to capitalise when demand rebounds.
LVMH demonstrates it is seeing through the gloom in its multi-billion dollar partnership with Formula 1, which has TAG Heuer timekeeping at its heart.
Another reason they will not hit the panic button is because Swiss watchmakers have been shifting stock into the United States in anticipation of tariff hikes.
For the four months from January to April, Swiss watch exports to the United States totalled CHF 1.39 billion in 2024. This year, that figure has jumped to CHF 2 billion.
From May to June this year, there was a slight drop in exports to the US worth CHF 138 million less to the Swiss, but that still left stock with a wholesale value of around CHF 600 million — around two months’ worth of inventory — in the country that had been charged at the pre-April tariff rate or with the additional 10% since.
And this is before another expected surge in exports to the USA this week to beat the Friday deadline.
“It is worth noting that watches imported into the US before the April 5 increase in tariffs are now being sold at the higher prices that were triggered by the rise, and are therefore most profitable for retailers and brands.”
A major American retailer, who asked to remain anonymous, told WatchPro
Taken as a snapshot, the weeks after any tariff increase will be choppy, but August is always slow and some strong sales and profits have been banked already this year within the United States.
I anticipate it will deliver another record-breaking year (thanks mostly to the big four brands), regardless of the current challenges.
I asked many brands to comment on their plans should the proposed 39% tariff kick-in on Friday. Most declined, which is unsurprising given how hard it is to predict what President Trump will do next.
A response that amused me was from the admirably responsive corporate press office of Swatch Group.
Asked whether the company intended to adjust prices in the USA, only the USA or worldwide, the reply on Monday was: “No negativism and speculation and, above all, no hyperventilating … especially from journalists. Keep calm”.
Good advice, which like the Swiss I intend to follow.
Swiss President Karin Keller-Sutter has already left Washington after meeting with US Secretary of State Marco Rubio, but not with President Trump.
Reuters reports this morning that the Swiss delegation left Washington empty-handed on Wednesday, telling journalists she had a “very good meeting” with Mr Rubio, but had not met Mr Trump.
The same report, quoting unnamed sources, says the Swiss president was pressing for a 10% tariff rate on affected goods, including watches, which US negotiators rejected because it would not do enough to close a White House-calculated $40 billion trade deficit.
Ms Keller-Sutter traveled to Washington prepared to discuss more energy and defense deals that would benefit American exporters.
Switzerland’s pharmaceutical companies, which are currently exempt from the proposed 39% tariff, have already announced investments worth tens of billions of dollars in US-based operations, but could also be squeezed to lower prices of their drugs for American consumers.
It seems unlikely there will be a last minute reprieve and the 39% tariff will be triggered tomorrow, but the industry should give itself time to consider its next steps.
The first half of 2025 has seen sensible preparation for an unpredictable trading relationship with the United States that gives it time to weigh-up its options.
I favour a global recalibration of prices, something brands do on an almost monthly basis as fluctuating currencies create price disparities around the world.
This would would keep price rises in America to a minimum and maintain parity across markets.
Negotiations will not stop if the 39% rate hits, and there is every chance that a deal at 15% or 10% will be agreed in the coming days, weeks or months. At this point, profit margins would recover and more normal business — if there is such a thing — will resume.