US tariff shock hits Swiss watches: pricing, margin, channel stress
Bottom Line Impact
If tariffs endure, expect a 100-250 bps EBITDA margin headwind and softer US revenues, with disciplined pricing and inventory management determining whether brands protect premium positioning or cede share to value competitors and pre-owned.
Key Facts
5- Swiss watch exports fell 3.1% YoY in September to CHF 2.0bn; without the US, exports would have risen 7.8%
- Exports to the US plunged 55% YoY in September, the second monthly drop after July pre-tariff inventory pull-forward
- US import tariff on Swiss watches set at 39%, the highest in developed markets for the category
- Segment mix: steel watches value -3.8% YoY; mid-priced segment exports +4.2% YoY; both <CHF 500 and >CHF 3,000 segments declined
- Implied US share of Swiss watch exports in September ~17% by value (back-solved from mix and growth contribution); Swatch Group shares -1.9% intraday on the news
Time Horizons
Executive Summary
A 39% US import tariff triggered a 55% plunge in Swiss watch exports to the US in September, turning overall sector growth into a 3.1% decline despite strong demand elsewhere. Brands face immediate choices on price pass-through, inventory reallocation, and wholesale terms to protect margin and brand equity in their largest market.
Actionable Insights
Immediate Actions (Next 30-90 days)
Implement a US-specific pricing corridor (+5% to +12%) by brand and SKU tier, coupled with a 90-day wholesale volume cap to align sell-in with true sell-through.
Rationale: Disciplined pass-through preserves brand equity and avoids margin dilution while preventing channel stuffing amid tariff-driven demand uncertainty.
Role affected:CEO
Urgency level:immediate
Activate duty mitigation toolkit: route imports via US foreign-trade zones, pursue duty drawback on re-exports, and negotiate shared tariff burden with key US retailers (target 30-50% cost-sharing on affected SKUs).
Rationale: Can offset 50-120 bps of margin pressure and improve cash conversion by deferring duty until merchandise leaves FTZs.
Role affected:CFO
Urgency level:immediate
Short-term Actions (6-12 months)
Reallocate 10-20% of Q4 US-bound inventory to Europe/Middle East and bias production toward mid-priced references that grew +4.2% YoY.
Rationale: Optimizes sell-through where demand is intact and tilts mix toward segments demonstrating resilience, reducing risk of US markdowns and grey-market leakage.
Role affected:COO
Urgency level:short-term
Launch a US value-protection plan: limited-time experiential bundles (service extensions, personalization) instead of discounts, and accelerate certified pre-owned (CPO) to defend entry price points.
Rationale: Supports conversion without eroding MSRP, and CPO leverages domestic inventory not subject to immediate import costs.
Role affected:CMO
Urgency level:short-term
Risks & Opportunities
Primary Risks
- US demand softness extends into 2025, deepening wholesale destocking and driving grey-market proliferation
- Over-aggressive US price hikes trigger volume loss in aspirational segments and harm brand equity
- Supply-demand imbalance leads to inventory write-downs and retailer disputes over tariff cost-sharing
Primary Opportunities
- Gain share in Europe and Middle East by reallocating constrained references and maintaining price discipline
- Strengthen DTC and CPO channels in the US to recapture margin and control pricing transparency
- Portfolio mix shift toward mid-priced models with positive momentum, improving turns and cash flow