Swiss Watches Pivot to India and Mexico Amidst Tariff and China Demand Woes

The iconic Swiss watch industry is currently navigating one of its most challenging periods in recent memory, grappling with the dual pressures of U.S. tariffs and softening demand in China. However, a recent report from Deloitte suggests that new horizons are emerging, with India and Mexico identified as crucial potential growth drivers that could help revitalize the sector, as announced on Wednesday.

Switzerland's third-largest export sector has faced significant headwinds, particularly from the United States, its largest market. In August, the U.S. imposed a substantial 39% tariff on Swiss products, creating considerable disruption. Simultaneously, exports to mainland China, another critical market for Swiss watchmakers, have continued to decline. This downturn is attributed to weakened demand stemming from factors such as high youth unemployment and turbulence within the real estate market.

According to data released by the Federation of the Swiss Watch Industry (FH), export figures underscore these challenges and shifts. While exports to the United States in 2023 saw a modest 5% increase from 2022, reaching 4.4 billion Swiss francs ($5.5 billion), the impact of the tariffs looms large. In stark contrast, exports to mainland China plummeted by 26%, totaling just 2 billion francs.

Against this backdrop, Karine Szegedi, leader of Deloitte Switzerland’s consumer, luxury, and fashion practice, emphasizes the imperative for the industry to strategically pivot towards emerging markets where growth trajectories are accelerating. "Tapping into new growth regions is crucial as a way of cushioning declines in established markets," Szegedi noted. She highlighted that "Countries like India and Mexico are a source of young, dynamic customers. These customers are open to innovations, allowing the Swiss watch industry to expand its global presence in the long term."

Deloitte's 2023 study had already pinpointed India as a high-potential market for Swiss watchmakers. This potential has been further solidified with the recent free trade agreement (FTA) signed between Switzerland and India, which came into effect on October 1. This landmark agreement is expected to significantly improve access for Swiss watch brands to India’s rapidly expanding middle class. This year's study further elaborates on India's appeal, citing its "strong domestic demand, rising affluence, and active investment in retail infrastructure."

Mexico also stands out as a promising market. Switzerland established an FTA with Mexico in 2021, a move that has since yielded impressive results, with Swiss watch exports to the country increasing fivefold. This surge has cemented Mexico’s position as the leading market in Latin America for Swiss timepieces. Deloitte attributes this escalating enthusiasm for watches in Mexico, in part, to the pervasive influence of social media.

Indeed, India remains the fastest-growing major market for the industry. FH figures reveal that Swiss watch exports to India surged by 25% last year, reaching 274 million francs. Mexico also demonstrated robust growth, with exports increasing by 16% to 337 million francs. Despite these encouraging gains, Deloitte cautiously warns that while rising sales in these burgeoning markets are significant, they will not fully offset the considerable impact of U.S. tariffs and the ongoing weakening demand in China. Currently, Mexico ranks as the 15th-largest market for the Swiss watch industry, with India closely following at 21st, signaling their growing but still developing stature in the global market.