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.
Key Facts
5- U.S. tariffs on Swiss imports set at 39% effective Aug 1; comparable levies for EU and Japan are 15%
- Delegation included Rolex CEO Jean-Frédéric Dufour, Richemont chairman Johann Rupert, and Partners Group co-founder Alfred Gantner; intent was to back a bilateral trade path without direct negotiation
- Pre-tariff shipments spiked as brands front-loaded inventory; U.S. inbound Swiss watch imports in July likely rose 35 to 45% MoM, creating 8 to 12 weeks of excess stock at key retailers
- Select prestige brands including Patek Philippe raised U.S. retail prices by an estimated 5 to 10% since Aug 1 to offset tariffs, strong franc, and record gold prices
- The U.S. represented roughly 16% of Swiss watch exports by value in 2023 at about CHF 4.2b; a 39% duty on a 2,500 dollar declared import value per 10,000 dollar MSRP adds circa 975 dollars, or ~10% of MSRP, compressing brand gross margin by 600 to 900 bps absent pricing action
Time Horizons
Key Roles Affected
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
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