Today 4

Swiss watch leaders court U.S. to ease 39% tariffs; margin relief in play

Bottom Line Impact

If tariff relief materializes, U.S. margin compression reverses and pricing power normalizes, enabling renewed top-line growth and defending brand equity; if not, proactive inventory discipline and duty optimization become essential to protect profitability and share.

Executive Summary

A high-profile Swiss delegation including Rolex's CEO and Richemont's chairman met President Trump amid 39% U.S. tariffs on Swiss imports, signaling an opening for negotiated relief. A step-down toward 10 to 15% would ease U.S. pricing pressure, normalize inventory flows, and could lift U.S. gross margins by 300 to 600 bps for prestige watch brands within one to two quarters.

Actionable Insights

Immediate Actions (Next 30-90 days)
Run dual-track U.S. pricing and allocation playbooks for tariff at 39% and tariff cut to 10 to 15%, with go-live readiness in 14 days
Rationale: Rapid tariff shifts can swing gross margin by 300 to 600 bps; preapproved playbooks accelerate response and protect brand equity
Role affected:CEO
Urgency level:immediate
Implement duty optimization and hedging stack now; combine FTZ or bonded warehousing to defer duties, gold hedges covering 6 months, and CHF USD overlays
Rationale: Deferral and hedging can offset 100 to 200 bps of margin pressure while talks progress and reduce PnL volatility
Role affected:CFO
Urgency level:immediate
Short-term Actions (6-12 months)
Throttle U.S. sell-in to align with 8 to 12 week retailer inventory; enforce MAP and require sell-through reporting weekly
Rationale: Avoiding oversupply and discounting preserves ASPs and protects flagship references from grey-market leakage
Role affected:COO
Urgency level:short-term
File USTR exclusion requests and coordinate industry coalition advocacy within 30 days; prioritize HS codes with highest duty impact
Rationale: An exclusion or staged reduction can deliver near-term cash savings and set precedent for broader relief
Role affected:Head of Government Affairs
Urgency level:short-term

Strategic Analysis

Next 30 to 90 days will see cautious U.S. sell-in as brands prioritize sell-through and MAP discipline to avoid grey-market leakage from pre-tariff stock. Expect selective price harmonization actions and targeted SKU allocations while government affairs teams pursue an exclusion or staged reduction pathway that could be announced within one to two months if talks progress.

Over 6 to 12 months, a negotiated reduction from 39% toward 10 to 15% would restore U.S. unit economics, support reacceleration of boutique expansion and high-jewelry watch launches, and re-enable synchronized global pricing. If relief lags, brands may shift allocations to Europe and the Middle East, deepen pre-owned trade-in programs to sustain demand, and explore duty deferral via FTZs and bonded warehousing.

Rolex retains the strongest pricing power and waitlist depth, cushioning tariff shocks. Richemont's multi-brand portfolio provides flexibility to reweight supply and marketing by region. Independents with thinner U.S. DTC footprints face higher margin risk and greater exposure to retailer discounting; groups with tight DTC control and robust compliance will gain share as grey-market discounts widen in a glut scenario.

Suppliers face order volatility as brands rebalance U.S. allocations; retailers like Bucherer and Watches of Switzerland may see higher aging inventory and tighter open-to-buy. Consumers encounter higher U.S. MSRPs and potential scarcity in core references; aftermarket channels may swell short term, pressuring brand equity. Logistics partners will manage more bonded storage and deferred entry strategies to optimize duty timing.

Risks & Opportunities

Primary Risks

  • Negotiations stall or broaden into wider trade dispute, keeping 39% tariffs in place through 2025
  • U.S. inventory glut triggers grey-market discounting of 10 to 20%, eroding brand equity and ASPs
  • Political optics create backlash to perceived elite lobbying, complicating regulatory avenues

Primary Opportunities

  • Tariff rollback to 10 to 15% lifts U.S. gross margins by 300 to 600 bps and supports selective price realignment
  • Tighter DTC control and MAP enforcement gain share from overexposed wholesale-led peers
  • Strengthened U.S. relationships enable faster boutique permitting, local service center expansion, and favorable customs rulings

Market Context

With China and Hong Kong softness and uneven domestic recovery, the U.S. remains the pivotal profit pool for Swiss watches; tariff relief would stabilize the sector's geographic mix. Gen Z and younger HENRY consumers are price transparent and value retention focused, amplifying the risk of grey-market discounting when inventories spike. Competitively, Rolex's demand reservoir and Richemont's portfolio breadth provide resilience, while independents and smaller maisons face tighter cash cycles; groups with strong pre-owned programs and omnichannel capabilities can better maintain ASPs and clienteling during volatility.

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