Column: 39 per cent US duty on Swiss-made watches - hope dies last

The Tagesschau headline on its website: "Stunned in Switzerland over US tariffs." That sums it up pretty well. And that's putting it mildly.

"Debacle", "confusion and anger", "slap in the face from Washington" - the gazettes are full of such linguistic ascriptions in view of the announced 39 per cent duty that will be imposed on all products exported from Switzerland to the USA from 7 August. 4th place in the global US customs ranking.

The Swiss watch industry in particular, for which things would look bleak without a Swiss-made label, would be badly affected. And because of the expertise and specialised production facilities, it would not be possible to simply relocate the manufacture of high-quality watches to a country less affected by Trump's tariffs.  

"The important American market is now being barricaded with one of the highest tariffs ever imposed by the Trump administration," writes the Neue Zürcher Zeitung NZZ.

Swiss negotiation fiasco

The bad news came on Switzerland's bank holidays of all days, on which US Secretary of State Rubio congratulated Switzerland in a friendly manner and without a customs reprimand - the impression of mockery is obvious.

The Confoederatio Helvetica had felt so secure and believed that it could negotiate a better "deal" than the EU, for which the President of the European Commission agreed 15 per cent with the US President.

And while many are still outraged by the EU's supposedly poor negotiating tactics, Switzerland, so self-assured, is experiencing a real negotiating debacle.

At the beginning of July, the Director of the Swiss State Secretariat for Economic Affairs, Helene Budliger Artieda, announced grandly at the General Assembly of the watch industry in Lausanne:

"I can't make a forecast, but I dare say: we won't fall back to 20 or 30 per cent." Budinger recommended expecting around ten per cent, in addition to the 3.2 per cent that already applied to the watch industry.

The 10 per cent dream is over

A text message has shattered this dream. And the Swiss seem to be completely unprepared.

And so, allegedly during the phone call, a text message arrived from the USA with the message: "End the call, otherwise everything will only get worse." And it got worse.

Rollercoaster ride for Swiss watch exports to the USA

In the first half of 2025, Switzerland exported watches worth CHF 2.56 billion to the USA. This corresponds to almost 20 per cent of the total export value in this period.

The market had developed as a good counterbalance to the declining exports to China. But Trump's announcement of his global tariff fantasies on 2 April during Watches & Wonders - the Holy Grail of watch events - which he is now gradually realising, has already caused a major shake-up in Swiss export statistics with regard to the USA. At the time, the Swiss were looking at 31 per cent.

For example Breitling CEO Georges Kern was still relaxed in May: "I'm 60 years old now, I've seen it all, every crisis, every board, every upheaval. In any case, I'm not panicking," he said in an interview with the Schweizer Handelszeitung. Asked specifically about the possible 31 per cent punitive tariff, he said: "Obviously tariffs are not helpful. But it can be assumed that they won't be as hotly eaten as they are cooked."

Breitling - even Goerges Kern loses his optimism

But now even Goerges Kern, who normally appears so calm and relaxed, has been rattled by the 39 per cent prospects. In an interview with the NZZ, the Breitling boss expressed his concern and even anger: "I am shocked by the outcome of the negotiations. Anyone who negotiates must always factor in the risks. Instead, we have been given a false sense of optimism."

"Switzerland is being held hostage by the pharmaceutical industry," is his explanation for the impending customs fiasco. "This affects all export-orientated industries except one: cynically, the pharmaceutical industry, which we have to thank for the situation, is exempt from the high tariffs for the time being." In his opinion, Trump is primarily concerned with healthcare costs, Kern told the NZZ.

"You can become more efficient. You can operate with a lower margin. And you can raise prices." And not just in the USA, but everywhere.

This could lead to further difficulties, as things are not going smoothly for Swiss watchmakers "everywhere".

(It should be noted here that the US customs duty of 39 per cent would be levied on the import value, which would mean a maximum increase in the sales price of 15 per cent).

Margins down, sales prices up?

With luxury watches, there is much more room for manoeuvre when it comes to pricing than with more affordable watches. And a loss of margin would certainly be more acceptable for many suppliers in the higher price range than for manufacturers in the lower price segments: So a mixture of margin cuts and price increases could work for some and prevent the really big crash.

However, the luxury clientele has also become more price-sensitive - not because they can no longer afford expensive watches, but because they don't want to be abused as an endlessly milkable cow.

Breitling CEO Goerges Kern recently put it in a nutshell to the Swiss Handelszeitung newspaper: "Customers understand that prices are rising. For example, because gold has become much more expensive. Or when a watch is newly equipped with a manufacture movement. What customers don't understand is when the identical product suddenly becomes much more expensive."

So whether higher customs duties would be accepted as a reason for higher prices is questionable. Especially as a Swiss timepiece is not something you have to have and buy immediately. Luxury watch buyers have also learnt to tolerate waiting times. You can be patient until the customs storm has subsided. Or simply spend their money on other beautiful non-Swiss made things.

The Swatch Group's dilemma

If you look at the middle and lower price segments, the situation does indeed seem dramatic. The Swatch Group in particular would be massively affected by a 39 per cent tariff. The watchmaking group has always heroically and commendably made a point of producing almost exclusively in Switzerland. Even low-cost watches such as those of the Swatch brand. Nevertheless, the Group has always presented itself as calm and above it all.

"No quick shots of negativism and speculation and, above all, no hyperventilating, especially from journalists. Keep calm," Swatch said in a statement to news agency AWP shortly after the 39 per cent announcement.

Despite all the coolness, there will be a lot of nervousness internally. After all, the USA is the Group's second most important sales market, and the trend is rising. For the time being. After all, this trend could be abruptly reversed if Switzerland is unable to negotiate a better deal with the US President by 7 August.

Richemont, LVMH and Rolex

The two luxury goods companies Richemont and LVMH are likely to fear the customs hammer a little less. Although both companies - including the French luxury group LVMH - produce their watches in Switzerland, they also have other products such as fashion, jewellery, leather accessories and spirits in their portfolio where Swiss-made does not play a role.

And Rolex? As usual, the ruler of the luxury watch market and specialist in controlled distribution policy says nothing and once again goes his own way. This was reported by the NZZ even before the collapse of the tariff negotiations with the USA became known:

But times are anything but usual - perhaps even Rolex will soon have to rethink.

Hope dies last

"All is not yet lost," says Oliver R. Müller, industry expert and founder of LuxeConsult, on his LinkeIn account: "Because true to his TACO tactic 'Trump never cows out', he can still change his mind within a week by extorting massive additional investments in the US from Swiss companies." However, it is doubtful whether this is what Swiss industry is hoping for.

Müller's post on LinkedIn to mark Swiss National Day on 1 August begins like this: "Happy National Day to all Swiss people with a lesson on 'The Art of the Missed Deal'!"