Swiss Watch Exports and the Tariff Volatility Play: Navigating Luxury's New Normal

The Swiss watch industry is bracing for a seismic shift. In April 2025, exports to the U.S. surged 149%, driven by panic over a proposed 31% tariff on Swiss goods—a move that briefly made the U.S. the largest market for Swiss watches. But behind the headline-grabbing numbers lies a story of geopolitical tension, regional market divergence, and a secondary market boom that could redefine luxury investing. For investors, this volatility presents both risks and opportunities.

The Artificial Surge: A One-Off or a Structural Shift?

The April spike—a record CHF 851.9 million in U.S. exports—was a panic-driven stockpile, not a sustainable demand surge. Retailers and brands rushed to secure inventory before U.S. President Trump's proposed tariffs, which were later reduced to 10%. The Federation of the Swiss Watch Industry (FHS) called it an “exceptional” anomaly, warning of a post-April slowdown. Indeed, May data showed exports to China and Hong Kong plummeted 31% and 23%, respectively, while global trade surpluses shrank.

Regional Market Shifts: The U.S. Rises, Asia Stumbles

The U.S. now claims 33% of Swiss watch exports, surpassing China—a market that had dominated until 2021. Yet China's decline isn't just about tariffs. Luxury fatigue, slowing consumer sentiment, and geopolitical tensions have eroded demand. Meanwhile, the U.S. boom is fragile: a 10% tariff could still crimp margins, and buyers may balk at higher prices.

The data shows a stark divide:
- High-end watches (>CHF 3,000): Grew 22.9% in value, driven by precious metals and steel models.
- Mid-range and lower tiers: Struggled, with weaker performance in key Asian markets.

The Secondary Market Boom: A Safe Haven in Volatile Times

The pre-owned watch market is thriving. Platforms like Subdial saw a 160% sales spike in April—double their typical monthly growth—as buyers sought to avoid tariff-driven price hikes. High-demand models like the Rolex Submariner and Patek Nautilus are soaring in value, with gold Rolexes up 5.3% through May.

But the secondary market isn't just a tariff hedge—it's a structural shift. Buyers now see pre-owned luxury as a tangible asset in uncertain times. Eugene Tutunikov of SwissWatchExpo notes: “Collectors are treating watches like real estate, seeking stability amid stock market volatility.”

Investment Strategies: Diversify, Hedge, and Focus on Resilience

1. Luxury Conglomerates Over Pure Plays:
2. Richemont (RFEN.SW): Owns Cartier, Piaget, and other high-margin brands. Its diverse portfolio cushions against watch-specific risks.
3. LVMH (MC.PA): Dominates fashion, spirits, and watches (e.g., TAG Heuer, Zenith). Geographic diversification and premium pricing power make it a safer bet.

4. Avoid Swatch Group (SWBN.VX): Its reliance on mid-tier brands like Omega and Tissot leaves it vulnerable to tariff impacts and shifting demand.

5. High-End Swiss Brands:
   Focus on companies that can pass costs to buyers. Rolex's parent, Richemont, has raised prices by 10% in key markets, absorbing some tariff costs. Investors should favor brands with strong secondary market demand (e.g., Patek Philippe, Audemars Piguet), which retain value even amid volatility.

6. Secondary Market Plays:
   While platforms like Bob's Watches aren't publicly traded, investors can indirectly benefit by backing luxury conglomerates with strong pre-owned divisions. Alternatively, consider ETFs like the Global X Luxury ETF (LUX) or regional plays in Swiss equities.

7. Geopolitical Hedging:
   Watch for companies expanding into tariff-free or low-tariff markets. India's removal of watch import duties (from 22% to 0%) offers a growth avenue. Brands like Omega, which emphasize consistent global pricing, are better positioned to navigate trade chaos.

The Bottom Line: Volatility Demands Prudence

The Swiss watch sector is at a crossroads. While the April surge highlights the industry's resilience, underlying weaknesses—luxury fatigue in Asia, trade uncertainty—demand caution. Investors should prioritize diversification, high-end brands with secondary market appeal, and conglomerates with global pricing power.

The next few months will test whether Swiss watchmakers can turn tariff-driven chaos into long-term strategy. For now, the watch to wear is one that balances risk and resilience.