Uncertain US tariffs put Rolex, Patek Philippe and Omega in a precarious position
Swiss watchmakers are nervously awaiting a positive outcome for US-Switzerland tariffs negotiations to avoid throwing the industry into chaos.
On July 1, Swiss exports in the US will be slapped with a 31 per cent tariff – that is, unless the country can negotiate a deal before then.
“These tariffs… place the international watch trade in a precarious position – balanced delicately on a horological tightrope until President Trump decides whether to reverse, pause for a longer period than 90 days, or further escalate the import duty,” Simon Lazurus, head of content at Chrono Hunter, said.
America is the single biggest market for Swiss watches, accounting for about 17 per cent of total shipments, making it a crucial market.
Switzerland was in fact singled out by Trump as one of the worst culprits of unfair trade with America. Last year, the US had a CHF 38.5bn (£33.9bn) trade deficit with the European nation.
As demand in China has cooled – and shows little sign of heating up again – luxury brands have been increasingly looking to the US to prop up falling sales.
For FTSE-250-firm Watches of Switzerland Group (WOSG) – distributor of Rolex, Omegas and Patek Philippe – America accounts for about 45 per cent of demand.
The company’s share price plummeted more than 22 per cent between April 2 and April 5. As of May 13, it was down eight per cent from its April 2 price.
Analysts have stressed that while brands may be forced to raise prices, they may not have the scope to.
“Post pandemic interest in luxury watches… saw many big hitters go for three to four times above the retail price,” Lazurus said.
“Combine this with 30 per cent [on top of] retail prices due to tariffs and it’s a lose-lose situation for retailers and consumers,” he said.
Switzerland moves closer to a deal
At the moment, Switzerland is at the front of the queue for trade talks.
“The UK and Switzerland have moved to the front of the queue for trade deals, whereas the EU [European Union] has been much slower. So we value that,” US Treasury Secretary Scott Bessent said at a press conference at the Intercontinental Hotel in Geneva on May 12, according to Reuters.
The UK became the first in a group of 15 favoured nations to secure a trade deal with the Us earlier this week after being slapped with 10 per cent tariffs on ‘Liberation Day’.
Swiss finance minister and current holder of the country’s rotating presidency, Karin Keller-Sutter, said that progress has been made and that “it is encouraging that the Americans want to speed up the proces.”
Keller-Sutter said Switzerland would propose a deal with the US within two weeks following talks with Bessent.
But she stressed it was too early to say Switzerland was “out of the woods” without a signed deal.
A move to pre-owned?
If a deal does not materialise, Lazarus expects “a growing shift and marked increase toward pre-owned luxury timepieces” as consumers move away from prohibitively expensive new imports.
“Shrewd buyers looking to avoid waitlists from Patek or Rolex may spot opportunities on the secondary market… It all boils down to supply and demand, provenance as well as desirability,” he added.
The pre-owned watch market is already experiencing rapid growth, outpacing the primary market and forecast to become as large as the primary market in the next decade, according to Deloitte.
Fuelled mainly by younger generations, growth has been helped by high prices in the primary market as well as the growth of easy-to-navigate digital platforms and the opportunity to access rare or out-of-production models.
Even classic sellers like WOSG are now selling pre-owned: revenue from its certified pre-owned division is forecast to be in the range of £3.3bn to £3.4bn by 2028.
Even without a deal, this area is certain to grow over the next decade. But if talks fall through, it is more likely to boom.