Swiss Watchmakers Brace for Tariffs With Cautious Optimism and Stockpiled Futures
Swiss watchmakers, gathered at their annual back-to-school event in Geneva, presented a united front of cautious optimism despite the looming threat of President Donald Trump’s tariffs on their businesses. While a surge in US-bound exports in July offered a temporary reprieve by allowing companies to build up stockpiles, the long-term impact of the 39% levy imposed by the US government remains a significant concern, particularly once these inventories are depleted. Industry leaders, including Breitling AG’s CEO Georges Kern, expressed hope that a resolution, at least partial, would be found in the coming weeks or months, citing existing backup plans and several months of inventory as safeguards.
The scale of the US tariff, a substantial 39% on products from Switzerland, sent shockwaves through the government in Bern. This rate, part of a broader US strategy to boost domestic manufacturing, was significantly higher than the 15% levy that had been negotiated by the European Union, leaving major exporters like Swatch Group AG and Cartier-owner Compagnie Financière Richemont SA facing an unprecedented burden. This development compounded existing challenges for the luxury watch sector, which was already grappling with headwinds from geopolitical tensions and record-high gold prices impacting consumer demand. The US represents a vital market for most Swiss brands, accounting for approximately 20% of watch exports, valued at 2.6 billion Swiss francs ($3.3 billion) in the first half of 2025, according to the Federation of the Swiss Watch Industry.
The response from individual watchmakers to the tariff varied considerably. Favre Leuba, an historic brand established in 1737, immediately paused its plans to enter the US market, a strategic move aimed at diversifying its customer base beyond its primary market in India, as soon as the tariff rate was announced. Chairman Patrik Paul Hoffmann emphasized that if the tariffs persisted beyond three to four months, the repercussions for the Swiss watch industry would be "rather substantial." In contrast, ZRC 1904, renowned for its innovative diving watches, opted to press ahead with its retailer expansion plans in the US, which had been initiated months prior to the tariffs.
The rush by companies to pre-stock the US market ahead of the tariff implementation provided a temporary boost to July’s export figures, which saw a 6.9% increase year-on-year. However, this positive trend masked underlying struggles within the industry; excluding the US, global exports would have declined by 0.9%, with shipments to key markets like Japan and China highlighting the broader challenges faced by the sector. Bloomberg Intelligence anticipates that this downward export trend will likely resume once the US stockpiling activity from July and early August subsides.
Despite the mixed signals, executives attending Geneva Watch Days, where 66 brands showcased their products across various venues, largely agreed that the future hinged on the outcome of tariff negotiations. Swiss trade negotiators are actively working to reduce the levy, with Geneva’s state councilor for economy and labor, Delphine Bachmann, expressing concern over the "shocking" disparity with the European deal. A Swiss delegation held further trade talks with US Commerce Secretary Howard Lutnick, signaling ongoing efforts to secure a more favorable agreement. Adding to the cautious optimism, Watches of Switzerland Group Plc, a leading Rolex retailer, reported "consistently strong" trading, particularly in the US, in a recent financial update that saw a surge in its shares. Chief Executive Officer Brian Duffy echoed the prevailing sentiment in a Bloomberg TV interview, stating, "The general mood in Switzerland is that the situation will improve from what it is today."
