A new and aggressive trade policy has caused a stir in the luxury goods market, with Watches of Switzerland Group Plc bearing the brunt of the fallout. The company’s shares dropped by up to 6% after US President Donald Trump announced a 39% tariff on all imports from Switzerland. This exceptionally high tariff rate is a significant escalation in the ongoing trade disputes and has put the company’s US operations under intense scrutiny.
Watches of Switzerland, which has a strong presence in the UK and a growing footprint in the US, is a major vendor of Swiss timepieces, including the highly sought-after Rolex brand. The company’s stock market performance is directly tied to the health of the Swiss luxury watch market, and this new tariff has created a substantial headwind. The day’s trading saw a steep sell-off, while Swiss-based competitors like Swatch Group AG and Richemont were shielded from the immediate panic by a national holiday.
The move comes after a period of intense volatility for Swiss watch exports. An earlier threat of a 31% tariff had prompted importers to rush shipments, leading to a temporary spike in sales. This was followed by a subsequent dip as traders hoped for a more favorable outcome. The 39% rate now presents a far more challenging scenario, as it is one of the highest tariffs ever imposed, signaling a significant deterioration in trade relations.
Industry experts are forecasting dire consequences if the tariff is enacted. Jefferies analysts believe that the 39% duty could lead to price increases of over 20% for US consumers, potentially stifling demand for high-end watches. The news, however, contains a small detail that could be significant: the tariff has a one-week grace period before implementation. This delay suggests the possibility that the tariff is a “negotiating tactic,” a point emphasized by Jefferies analyst James Grzinic, leaving room for a potential last-minute resolution.