Watch sales in Switzerland significantly decline due to un certainty surrounding tariffs.
Unexpected Dip in Swiss Watch Exports Due to US Tariff Threat
Swiss watch exports took a nosedive in May, plummeting by 9.5%, as per recent numbers from the Federation of the Swiss Watch Industry (FH). This downturn marked a reversal of the steady sales recovery that had started at the year's onset.
The mid-priced watch market, between 500 and 3,000 Swiss Francs (SwF), displayed a steady trend. On the other hand, the other major price segments witnessed an average drop of 11.4%.
The United States, the globe's dominant market for luxury timepieces, accounted for over 40% of the worldwide decrease, with imports plummeting a staggering 35.2%. Sales to Japan decreased by 10.5%, and exports to the UK shrank by 14.5%.
It appears that President Donald Trump's 31% tariff threat on US imports from Switzerland was the main catalyst for the slump, with the watch industry heavily reliant on the US.
turbulent Stock Market for Swiss Watch retailers
Watches of Switzerland and Swatch shares tumbled by more than 2% in early trades. In April, broker Peel Hunt downgraded Watches of Switzerland's target price from 500p to 400p due to the tariff uncertainties.
"Given the high uncertainty, we are not drawn to the shares, even after their fall," Peel Hunt remarked.
Analysts projected that tariffs on Swiss exports could inflate watch prices by 10 to 15 percent. Vontobel analyst Jean-Philippe Bertschy further elaborated in a note, stating that factors like "luxury fatigue," deteriorating consumer confidence, and the deteriorating "feel-good factor" from luxury purchases all contributed to the fall in sales.
Anticipating a slightly tougher year for Swiss watches from an exports perspective in 2025, RBC analysts noted US economic policy and the normalization of inbound tourism in Japan as key factors. They predicted that Swiss watch exports would decrease by 7% over the year.
The intricate dance between proposed tariffs, US economic policy, and other global influences like tourism in Japan results in a significant yet complex impact on Swiss watch exports in 2025. Despite surging exports in early 2025 due to front-loading shipments before the tariff increase, there's expected to be a correction later as stockpiles are absorbed, potentially leading to a slowdown. Furthermore, Swiss watchmakers have been compelled to raise prices in the US market due to the tariffs, gold prices, and a stronger Swiss franc. This price escalation may dampen consumer demand and sales in the long term. Simultaneously, a thriving US economy and tourism recovery in Japan could partially counteract global demand fluctuations for Swiss watches. Bilateral trade negotiations between the US and Switzerland may lessen the impact of tariffs, but as of mid-2025, no deal had been forged.
In light of the proposed tariffs on Swiss exports and the uncertain US economic policy, the stock market for Swiss watch retailers is predicted to experience volatility. Analysts suggest that the finance sector, particularly the business of Swiss watchmakers, may encounter a 7% decline in exports for the year 2025, due to various factors including the impact of tariffs and the intricate interplay of global influences.
