Column: Beautiful, perfect Watches & Wonders world - with small cracks

Column: Beautiful, perfect Watches & Wonders world - with small cracks

Even if they are only hairline cracks. But at least they are so visible that people talk about them. Even in the glamour bubble of Watches & Wonders 2025 in the Palexpo halls, where no daylight reaches. And it feels like hardly any news from the outside world is really relevant.

Admittedly, when navigating from one stand to another or from one so-called touch & try session to the next, you can almost forget that there is an outside.

Actually, everything is beautiful: the stands, the catering, the drinks supply, the never-ending stream of shuttles (the last three points even free of charge) and, of course, countless magnificent clocks that don't show the currently rather gloomy world situation.

New technologies, new materials, plenty of gemstone sparkle - the Swiss upper watch world (now peppered with brands of other provenance) is once again confidently selling its best side in Geneva.

And stuck to this practice unwaveringly when the customs plans leaked into the hallowed Palexpo halls and the talks there. By the morning of the third day of the trade fair at the latest, it was clear that the USA would indeed implement its announced, ludicrous tariff plans - and Switzerland would be hit particularly hard.

After all, the USA is the most important export country for the non-EU nation. And now, from 9 April, at the request of the US President, 31 per cent (a list of 32 per cent has now also emerged) punitive tariffs will be levied on all goods that find their way from the Alps to Trump country. "Only" 20 per cent is levied on goods from the EU. Most people had probably expected this Swiss surcharge, but also that there would have been a slightly longer lead time.

"Our warehouses are currently empty, as they usually are at the beginning of the month," Edouard Meylan, owner of Moser & Cie, explains the situation in the USA to the NZZ. As a result, according to the Swiss daily newspaper, some brands are "trying to move as many items as possible from other parts of the world to the USA in the short term. The CEOs of other brands - from young companies such as Norqain to industry heavyweights such as TAG Heuer - are also reporting similar behaviour." Of course, this is not a long-term solution.

Mixed starting position

With a minus of 2.8 per cent, the Export year 2024 for the Swiss watch industry can be described as mixed. The persistently weak demand in the Chinese market was temporarily offset to some extent by the weak yen in Japan, but also in the US market of all places. The value of exports to Japan rose by 7.8 per cent and to the USA by 5 per cent last year.

Sounds good, but only seems so. Because by the end of 2024, the figures had already deteriorated. The overall drop in value in December last year was 5.4 per cent compared to December 2023. While the decline in exports to the USA was still moderate at just one per cent, the value of exports to Japan plummeted by 12.7 per cent last December.

After a slight recovery in the first month of the current year - USA and Japan performed very well - the joy was already over in February. Global exports were down 6.6 per cent compared to the same month last year, with US exports falling by 6.7 per cent and exports to Japan down 19.1 per cent.

New world times are dawning with Trump

On 20 February, Donald Trump was finally sworn in as US President for the second time and started his big clean-up operation. His behaviour, including his government crew of groupies gathered around him, is far more unpredictable, loud and ruthless than feared.

And then on Thursday, the punitive tariff plans burst into the vibrant Palexpo halls filled with good-humoured and well-fed people. But apart from us journalists, nobody in the glittering Watches & Wonders bubble really wanted to talk about this punitive measure at first.

Wait and see. We will keep an eye on it. Our customers can travel and buy our watches anywhere in the world. ... The exhibitors did not reveal any more - if anything at all.

There were still some somewhat more realistic answers. And these said that we should certainly expect that one or two purchases of luxury goods - even in the very high-priced segment - could possibly be postponed in the current tense times with a trade war on the horizon.

But this means nothing other than that people are buying less luxury overall. If you don't buy a Rolex now, you won't buy two in six months' time - not even people who could afford them. For the simple reason that you don't actually need a Rolex or luxury watch.

You can drink as much free champagne as you like - yes, it is actually available at Watches & Wonders, at least during the non-public days - but unfortunately this doesn't make the world of luxury watches any more beautiful.

Believe me: if I believed in it, I would have tried it!

However, the brief glimpses into the less glamorous storage rooms through the odd curtain and door slit on the way to the sometimes necessary service facilities (after drinking champagne as well as still water) reminded me that the world outside has now put out its feelers through small hairline cracks into the still-standing luxury bubble.

This can no longer be ignored.

How will the Swiss watch industry react?

"She adjusts the prices and hopes that people will continue to buy her products."

This is what Oliver Müller, industry expert and founder of LuxeConsult, told the Swiss magazine watso about the luxury watch industry.

A price increase of over 30 per cent is of course unthinkable, so this can only be part of the solution - if the price upgrade is accepted at all. Lower margins are inevitable and will probably have to be accepted by the luxury watch industry, which is spoilt in this respect.

Breitling boss Georges Kern is still relaxed and is quoted by nau.ch as saying that the tariffs are "obviously not helpful". However, he would assume that things are not eaten as hot as they are cooked.

Edouard Meylan from the Moser & Cie. brand, which sells almost a third of its annual production of around 3,500 watches in Asia, the USA and Europe, was more pragmatic in his comments to the Swiss media organisation srf. He can imagine having his watches assembled at his service centres in the USA in future due to the tariffs.

And according to srf, Mario Peserico, General Manager of Eberhard & Co., feels that his strategy of always focussing on Europe instead of the USA or China has been confirmed.

And then there is also the scenario that Trump's fickleness breaks out and in a few days he no longer wants to know anything about his latest customs decision - and sets his sights on other "deals". Especially as there is no comparable production of luxury watches in the USA to compete with the Swiss-made brands.

As the saying goes: hope dies last - even in Switzerland.

How watch manufacturers in the lower and mid-price segments will deal with the punitive tariffs is another matter entirely. Relevant price increases are a red flag there, as potential buyers will once again think very carefully about what they spend their money on in uncertain times like these due to their limited financial resources compared to luxury consumers.