Watches of Switzerland shares slump as Trump ups tariffs
Watches of Switzerland saw its share price drop more than seven per cent in early trade as investors shied away from the effect of Trump’s sweeping new tariffs.
On Friday morning, Trump announced a new tariff rate of 39 per cent for Swiss exports to the US – higher than the initial ‘Liberation Day’ tariff of 31 per cent.
Chris Beauchamp, chief market analyst at IG, said the tariffs “revive fears of renewed price increases for consumers… most obviously in the US, but potentially around the rest of the world too”.
Peel Hunt has warned that US watch prices could increase by 10 to 15 per cent as a result of the initial 31 per cent tariff, a figure which will be even higher now – a bad prognosis for a sector that has been struggling with demand.
RBC analysts have pointed out that the watch firm has lower margins than competitors, making it more difficult to respond to tariffs.
Switzerland was singled out by Trump earlier this year 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.
Exports of watches to the US fell 9.5 per cent in June May, according to the Federation of the Swiss Watch Industry (FH), reversing a recovery in sales that had been brewing this year.
The US market – the biggest global market for luxury watches – was the biggest driver of the overall decline.
Unfortunately, Watches of Switzerland has been relying on a boost in US demand: it was the company’s core driver in the six months pre-tariffs.
Watches of Switzerland’s share price has fallen by 23 per cent since April 2 and more than 42 per cent in the last six months.
The share prices moves on August 1, however, are far lower than the 22 per cent drop the company suffered on April 2.