The ripple effects of President Trump’s escalating trade war were felt acutely by Watches of Switzerland Group Plc, whose shares fell by up to 6% following the announcement of a new tariff. The company, a prominent retailer of high-end Swiss timepieces, is directly in the crosshairs of the new 39% duty on Swiss imports, one of the highest rates ever imposed by the administration.
As a major player with a significant presence in the US, Watches of Switzerland is particularly vulnerable to trade policy shifts that affect its core product lineup. The swift sell-off in its stock reflects investor fear that the company’s profit margins will be squeezed and its sales in the US will be negatively impacted. In contrast, the biggest Swiss watch producers, Richemont and Swatch Group, were spared from the day’s trading turmoil as financial markets in Switzerland were closed for a holiday.
The current situation follows a period of significant uncertainty for the Swiss watch industry. In the spring, a 31% tariff threat had caused a temporary rush in exports as importers tried to build up stock. This surge was followed by a lull as hopes for a more favorable trade outcome were high. The new 39% tariff, a more severe measure, has now dashed those hopes and renewed concerns about the industry’s future.
The potential economic consequences for consumers are stark. According to Jefferies analysts, the 39% tariff, if it goes into effect, could necessitate price hikes of more than 20% on luxury Swiss watches sold in the United States. This potential price shock could significantly dampen consumer demand. However, there is a small window of hope, as the one-week delay until implementation suggests the tariff could be a “negotiating tactic” aimed at extracting concessions from Switzerland.