Watch industry in 'shock' over 39% tariff on Swiss imports like Rolexes

The Trump administration has raised its proposed tariff on Swiss imports to 39%, effective August 7, which is expected to significantly impact the US luxury watch market. This escalated tariff will likely lead to higher prices for new Swiss-made watches like Rolex and Cartier, or reduced inventory for American consumers. Consequently, demand is projected to shift substantially towards the pre-owned watch market, with experts forecasting price increases of 10% within a month and up to 35% in six months for secondhand models due to this demand surge.

Analysis

The impending imposition of a 39% tariff on Swiss imports, an escalation from a previously proposed 31% rate and set to take effect on August 7, represents a significant disruptive event for the U.S. luxury watch market. This trade policy will directly impact the pricing and availability of new timepieces from premier Swiss brands like Rolex and Cartier. According to a Morgan Stanley report, these brands have already initiated price increases in the U.S. in response to a prior 10% tariff, and this new, substantially higher rate is expected to either accelerate price hikes or lead to a reduction in inventory allocated to the American market. The most critical consequence identified by market experts is a structural shift in consumer demand from the primary to the secondary market. This anticipated pivot is expected to reverse the trend of falling pre-owned watch prices observed since mid-2022. Watch marketplace executives forecast an immediate and sharp reaction in the secondary market, with potential price increases of 10% in the next month and up to 35% within six months as demand consolidates around the finite, tariff-free inventory already within the U.S.

Key Decisions for Investors

• Investors should consider increasing exposure to platforms and dealers specializing in the pre-owned luxury watch market, which are positioned to capitalize on a forecasted surge in both demand and prices.
• It is prudent to re-evaluate long positions in luxury goods companies with significant U.S. revenue exposure from Swiss-made products, as they face potential margin compression or a drop-off in sales volume due to the prohibitive new cost for consumers.
• Monitor the price differential between new and pre-owned models for potential arbitrage opportunities, while also tracking any diplomatic negotiations between the U.S. and Swiss governments that could alter the tariff's implementation and present a risk to this thesis.