There is a lively debate about how Swiss watchmakers will react to the new 39% tariff that hits all goods entering the United States from today.
Some say the cost should be born entirely by American importers, retailers and consumers, leading to a price rise of around 10% in the country (3x the 3% average price rise imposed after the 10% additional tariff landed in April).
Others believe any price rise could be limited to low single-digits but imposed worldwide.
A small worldwide rise would have the benefit of maintaining price parity between markets, which brands have always favored because it stops wealthy jetsetters shopping for the best deals all over the world.
It is worth noting, however, that perfect price parity is almost impossible to achieve, and would require retail prices to be updated almost daily as currencies fluctuate.
Japan was the cheapest major market in the world in 2024 for anybody converting a strong currency into the weaker yen, leading to Swiss watch exports to the country rising by almost 8%.
Now Europe looks great value, particularly for visiting Americans, or even Britons, who can claim the 20% VAT back when returning from a visit to Paris, Rome or Amsterdam.
Before any price increase in the United States that might be triggered by the new 39% tariff rate, a Rolex Cosmograph Daytona John Mayor (gold case and bracelet, green dial), is being advertised for $48,400. An average sales tax of 7.5% would increase that to $52,030 at checkout.
In British pounds that converts to £38,710, around 6% cheaper than the recommended UK price of £41,200.
In other words, Rolex could increase the price in America by 6% and would actually bring it more into line with UK prices.
Of course, Americans shopping in the UK do not get their VAT back, but if they shop in the European Union, they do.
In Paris, the price of the same John Mayor Daytona is €48,400, about $56,000, so more expensive again than the $52,030 in America.
But Americans get the VAT back, making a Paris purchase the equivalent of $45,073, although the watch should be declared at customs when re-entering the US.
This is one example of a watch that could have its price jacked by $20,000 and would still have a waiting list, but the calculation is interesting, because it shows there is plenty of room for manoeuvre before differences in global prices significantly impact where people shop.
That is not to say that a 10% price rise in the United States would have no impact. It would certainly affect demand in the country for all-but a handful of the power players, but that is for each brand to grapple with and we will see how they navigate this challenge in the coming days and weeks.