Friday was a public holiday in Switzerland, which may explain the watch industry’s silence in the face of a new 39% tariff that will hit all exports to the United States from August 7.
Goods in transit before this date will not be impacted, so expect the skies to be grey with planes airlifting as much stock into America before the Thursday deadline.
This will add to a surplus of around one month’s additional supply that was airlifted into the country in April.
Despite the significant potential impact of the new tariff rate, media and investor relations pages for Richemont, LVMH and Swatch Group carry no statements on how they will mitigate the impact of the shockingly punitive tax and direct requests for comment have so far gone unanswered.
Rolf Studer, co-CEO of Oris, is so far a lone voice speaking for the Swiss watch industry when he told Hodinkee it could handle the 10% tariff imposed since April, but that the 39% tariff is “prohibitive” and would effectively lock out a large portion of the Swiss industry from the US market.
“I hope that the last word hasn’t been spoken and that a solution is found,” he adds.
Brian Duffy, CEO of Watches of Switzerland Group, which generates close to half of its £1.5 billion turnover from the United States, told the Financial Times that the 39% rate is “a shock”, but that demand in the country was strong enough for the biggest brands to keep selling, even with an expected price rise of over 10% that the new tariff rate might trigger.
That is probably true for Patek Philippe and Rolex, which still have waiting lists for most collections, but the “shock” will be felt a great deal more by the other 99% of brands that are currently making more watches than they can sell, and seeing significant discounting on the grey market.
Mr Duffy says the company will bring forward orders this week and ship stock earlier to mitigate the impact but concedes that watches “could get more expensive” in the US.
What are the chances of a Swiss-USA trade deal?
Switzerland still has the next few days to persuade President Trump’s administration to agree a trade deal.
The hope will be that an agreement can be reached that keeps the country in line with the European Union’s 15% tariff rate, or better still the UK’s 10%.
This would be a risky assumption because it is predicated on Swiss president Karin Keller-Sutter having cards to play, in Mr Trump’s parlance, at the negotiating table.
Her weakness, and the White House’s bugbear with the Swiss, is the huge trade deficit between the two countries.
According to the Office of the United States Trade Representative, a government department that reports directly to the Executive Office of the President, America’s trade deficit for goods with Switzerland was $38.5 billion in 2024, a 56.9% increase ($13.9 billion) over 2023.
US goods imports from Switzerland totalled $63.4 billion in 2024, up 21.3%, while exports in the other direction declined by 10.1% to $25 billion.
Free trade negotiations between Switzerland and the United States have gone nowhere for almost two decades, and the country’s officers must abandon any hope of reviving them now.
This week is not about the thousands of pages of detail that go into full-blown trade agreements. It is about damage mitigation to avoid a tax that could destroy thousands of jobs in the Swiss watchmaking industry, and drive many businesses into bankruptcy.
That means a headline agreement committing to 10% or 15% on all goods covered by the executive order listing the new tariff rates that will take effect on Thursday, August 7.
It is worth noting that the 39% tariff is a guided missile fired directly at the Swiss watch industry, and little else in the country.
Switzerland’s pharmaceutical industry is excluded from the 39% additional tariff, a relief to the likes of Novartis and Roche, which contribute to global exports for the country of around $110 billion in 2024 (up from $80 billion in 2023).
Exports worth $35 billion went to America.
Gold and financial services are also excluded from the new tariff, so that really only leaves Swiss watches, machinery and chocolate as the remaining Swiss industries directly affected.
Swiss exports of machinery to the United States were worth $3.6 billion in 2024 and just $117.6 million in “cocoa and cocoa preparations” were sold.
This compares to Swiss watch exports to the USA, which were valued at CHF 4.4 billion ($5.4 billion) last year.
Much of the machinery exported to America is of the high-precision variety used in both medical and watchmaking fields, so any tariff pain affecting these businesses will also hurt the watchmaking ecosystem of Switzerland.
It is very difficult to see any offer Ms Keller-Sutter could make that will persuade the Trump administration that more balanced trade can be achieved.
The best bet is for Switzerland to commit to buy more American goods.
But what goods? Switzerland spent $7.2 billion on defence last year, less than 1% of the country’s $950 billion GDP in 2024.
Trump wants all NATO members to spend 5% of GDP on defence, which would amount to $28.5 billion for Switzerland.
Although Switzerland is not a member of NATO, a commitment to spend 5% of GDP on defence, particularly if a good slug of the additional spending went to American exporters, is an offer it could consider.
Or how about something more transactional? Switzerland is believed to own over 1,000 tonnes of gold — worth around $80 billion.
The Donald is a man who likes gold. Could Switzerland make some sort of deal, perhaps storing a significant proportion of its holding in the United States or selling some at a discount?
There are likely to be myriad instruments in the banking and finance industry that could be recalibrated to favor America.
These are overly-simple suggestions for a maddeningly complex negotiation with an unpredictable President and his administration, but there is evidence that headline-grabbing answers that personally appeal to Mr Trump’s sense of fairness are more likely to succeed than reasoned and technical solutions.
Time is ticking down to the Thursday deadline and a grand gesture is required. Whether Switzerland’s leaders have the creativity to find one remains to be seen.