What If the US Imposes 39% Tariffs on Swiss Watch Imports?

Industry Response

Major groups such as Richemont, LVMH and Swatch Group have so far refrained from making official statements, although some brands under their control have already raised US prices in response to the earlier 10 per cent duties imposed in April. Analysts estimate that a tariff at the new level could translate into price increases of more than 10 per cent for American consumers, with profitability across the sector inevitably squeezed.

The strongest brands with long waiting lists, such as Rolex and Patek Philippe, are expected to retain much of their demand. By contrast, companies producing larger volumes than the market can absorb, and those exposed to discounting on the secondary market, may see demand soften once retail prices adjust.

Broader Economic Implications

The Swiss watch industry employs around 60,000 people domestically, and the US has consistently ranked as one of its largest export markets. In 2024 the US absorbed 4.4 billion Swiss francs of watch exports, equivalent to 17 per cent of the industry’s global total. Any disruption to this channel therefore risks immediate consequences for production, distribution, and employment.

The scope of the tariffs is limited to watches, machinery and chocolate, while pharmaceuticals, gold and financial services are excluded. Swiss pharmaceutical exports alone amounted to over 100 billion US dollars in 2024, making the relative weight of watchmaking in the dispute both symbolic and politically charged.

Trade Balance Tensions

The background to this policy lies in the widening US trade deficit with Switzerland. In 2024 the deficit increased by 56.9 per cent to 38.5 billion dollars. Swiss exports to the US rose by 21.3 per cent to 63.4 billion dollars, while US exports to Switzerland fell by 10.1 per cent to 25 billion dollars. Negotiations over a bilateral free trade agreement have been dormant for nearly two decades, leaving little institutional framework to resolve such disputes.

Possible Outcomes

One option under consideration is that Switzerland could seek to rebalance trade flows by increasing imports of American goods or by making concessions in other sectors. Without such adjustments, the probability of long-term tariffs remains high. In the short term, manufacturers have attempted to ship products before the 7 August deadline, temporarily inflating July export figures.

If tariffs remain in place, brands will face a difficult choice between passing the costs on to consumers, absorbing part of the increase, or reducing shipments to the US. None of these scenarios is favourable for profitability, particularly for brands in the mid-market segment.

Secondary Market Dynamics

The American secondary watch market is likely to gain strength. In the first half of 2025 sales of pre-owned watches in the US increased by 30 per cent in both value and volume. Higher tariffs on new imports could accelerate this trend, especially in vintage and sought-after models already present in the country. Stocks imported before the deadline could become highly desirable, turning unsold inventory into a form of asset for retailers and collectors.

Global Redistribution of Exports

If the US market becomes less profitable, manufacturers may redirect part of their supply to other regions. Asia and the Middle East are likely to benefit in the medium term, although China and Japan have recently shown weaker demand. Markets such as Singapore and the United Arab Emirates may absorb some of the volume, given their strong appetite for luxury goods and established role as distribution hubs. Europe is expected to remain stable but unlikely to compensate for the scale of potential losses in the US.

Conclusion

The threat of a 39 per cent tariff on Swiss watches entering the US represents one of the most serious challenges for the industry in recent decades. With the American market accounting for almost a fifth of total exports, the measure would have wide-ranging implications for employment, pricing, and brand strategies. While the strongest names may weather the storm, many other players risk being squeezed. The episode underlines the vulnerability of Swiss watchmaking to geopolitical pressures, while also highlighting the adaptability of an industry that may increasingly turn to other regions to offset the potential contraction in the United States.