Business News: Swiss Watch CEOs Plot Next Move As US Tariffs Threaten Industry Sales
After details emerged Wednesday evening that the Trump administration planned to impose major tariffs on Swiss products, including watches imported to the US, Serge Michel, the founder of independent brand Armin Strom, got to work. Michel took in-person meetings with retail partners attending the Watches and Wonders salon in Geneva or reached out to others by phone. Together, they plotted an immediate response to the threat of 31% tariffs on Swiss goods entering the US.
”They are saying, ‘please ship whatever you have ready to ship now,”’ Michel said in an interview.
The US accounts for about 40% of the Biel, Switzerland-based brand’s sales. In the short term, Armin Strom is looking to find ways to export finished pieces to the US sooner than expected in hopes of avoiding the levies that, if implemented, would pressure brands and retailers to ratchet prices higher.
“It’s very bad timing,” Michel said, noting that many brands had already conducted significant price hikes in response to higher input costs and the strong Swiss franc.
The US is the biggest single market for Swiss watches and the main growth driver, accounting for almost 50% of the growth in Swiss watch exports since 2019, according to a report published today by Switzerland’s Vontobel Group. With many customers already stretched by inflation, Michel said significant price hikes are not an option for Armin Strom, whose watches sell for between 20,000 CHF and 120,000 CHF in Switzerland. He expects that if the tariffs come into effect, both brands and retailers will have to take a lower profit margin on sales.
“To raise prices is not an option,” he said. ”We must somehow react on the margin side and share the pain between the partners.”
Whether the Trump administration follows through on the tariffs remains to be seen. The White House has previously backed down on tariff threats made against Canada and Mexico after it received concessions on border security and other issues.
In a statement issued Thursday, the Swiss Federal Council said it would analyse its measures and their impact. The Federal Council said it was in contact with affected industries and US authorities and is seeking a solution.
The sweeping tariffs announced by the US government against various trading partner nations are said to be based on respective trade deficits. The Swiss Federal Council said the 31 % or 32% tariffs Swiss goods will be subjected to are ”particularly high” compared to other US trading partners with a similar economic structure, such as the European Union, which is facing 20% tariffs, Japan with 24% tariffs, and the UK with 10%.
“The calculations of the US government are not clear to the Federal Council,” it said.
The tariff threats come at a time of significant challenges for the Swiss watch industry as total exports fell nearly 3% by value in 2024 after three years of records. The resilient US consumer has been a bright spot for the sector, with exports rising 5% in 2024 to about 4.4 billion CHF by value. That’s as exports to China plunged by 25%.
Some CEOs remain optimistic in the expectation that the shocking 31% Swiss tariff is merely an opening salvo in a negotiation that could result in less pain.
“Tariffs are obviously not helping,” said Georges Kern, the CEO of Breitling. ”However, there is the German expression (es wird nich so heiß gegessen, wie gekocht) – things are never as bad as they seem. In any case, Breitling is prepared and will deal with it,” Kern said.
Jean-Christophe Babin, the new CEO of LVMH Watches, whose brands include Hublot, Tag Heuer, and Zenith, says the luxury group will seek to clarify how the US calculates its tariff rates before taking action.
”It is not possible to comment or take any action until we understand what it is,” Babin said briefly at Watches and Wonders in Geneva. “We are a big group. We are the world luxury leader, so we have a lot of tax experts who are connected and will try to clarify the content of the calculation so that the Swiss government can also understand better,” said Babin.
Ever since Trump’s tariff threats against various trading partners began, ”the first round has been very high, and then there are discussions. So we will see,” he added.
Still, the potential for double-digit tariffs on luxury goods from Switzerland and the European Union weighed heavily on stock market prices for the biggest groups on Thursday, with LVMH shares falling 5%, shares of Richemont, the owner of brands including Vacheron Constantin and IWC, falling 6%, and shares of Swatch Group, which controls the Tissot and Longines brands among others, also down more than 6%.
Rolex, the top Swiss brand by sales and exports to the US market, declined to comment when asked about the tariff threats.
Ben Kuffer, the CEO of independent family-owned brand Norqain, said the late-night tariff news brought a troubling end to what had been a positive day as the brand announced earlier that hockey superstar Sidney Crosby had invested in the company. Kuffer said he hopes organizations like the Federation of the Swiss Watch Industry will take the lead in negotiating on behalf of Swiss brands and will make the case that Swiss watches can’t be produced in the US. The US accounts for about one-third of the brand’s sales.
”Certain costs will have to be reduced to operate,” said Kuffer.
“The US will remain the key market for the Swiss watch industry, and this has the potential to have a major impact.”
Hodinkee
