Swiss Watch Industry Under Threat: How New US Tariffs Could Reshape Luxury Markets

The Swiss watch industry, long a symbol of craftsmanship and prestige, now faces a dual existential threat: a 39% U.S. tariff on imports and a seismic shift in consumer behavior driven by Gen Z. These forces, converging in 2025, are forcing luxury watchmakers to reevaluate their supply chains, pricing strategies, and brand narratives. For investors, this inflection point offers both risks and opportunities, as the sector navigates a landscape where heritage meets disruption.

Tariffs: A Sudden Shock to a Global Industry

The U.S. imposed a 39% reciprocal tariff on Swiss goods—including luxury watches—on July 31, 2025, under the Trump administration's America First Trade Policy. This rate, among the highest in the world, was delayed until August 7 to allow for administrative review but remains in place as of this writing. The U.S. is the largest foreign market for Swiss watches, accounting for 16.8% of exports in 2025 (CHF 4.4 billion). With no exemptions for watches, the tariff has forced brands to absorb costs or pass them to consumers.

For mid-tier brands like Tissot and Oris, which operate on thinner margins, the impact is acute. Analysts estimate potential mid-single-digit declines in pre-tax earnings if tariffs persist. High-end labels like Rolex and Patek Philippe, however, have leveraged brand equity to absorb costs, raising prices by 12–14% in the U.S. This has accelerated a shift to the pre-owned market, where 30% of 2025 sales growth is attributed to vintage collections.

Gen Z: The New Gatekeepers of Luxury

Gen Z, now the largest demographic cohort in the U.S., is reshaping luxury consumption. A 2024 report by Watchfinder & Co. found that 41% of Gen Z individuals aged 16–26 acquired a luxury watch in 2023, with an average of 2.4 new and 1.4 pre-owned purchases per buyer. Social media platforms like TikTok and Instagram have turned watches into status symbols, with influencers like Anish Bhatt (1.6 million followers) driving demand for vintage and pre-owned pieces.

However, tariffs and rising gold prices (up 33% in 2024) are making new watches less accessible. Gen Z buyers are increasingly opting for pre-owned or grey-market purchases, with many traveling to Europe to avoid tariffs altogether. This trend has prompted brands like Rolex and TAG Heuer to expand certified pre-owned programs, offering transparency and value retention.

Supply Chain Adaptations: Diversification and Digital Innovation

Swiss watchmakers are responding to tariffs with a mix of short-term and long-term strategies. In the immediate term, brands pre-positioned inventories in the U.S. before the tariff's implementation, securing two months' worth of stock at lower rates. For example, the Swatch Group increased U.S. shipments by CHF 600 million in early 2025.

Longer-term, the industry is exploring geographic diversification. While full relocation of production is impossible due to Swiss-Made regulations (60% of production must occur in Switzerland), brands are optimizing supply chains and exploring partnerships in tariff-friendly regions like Turkey or Morocco. Additionally, AI-driven supply chain optimization and blockchain for transparency are being adopted to reduce costs and enhance traceability.

Investment Implications: Navigating the New Normal

For investors, the key lies in identifying brands that balance heritage with innovation. High-end labels like Rolex and Patek Philippe, with strong pricing power and loyal customer bases, are likely to weather the storm. Their ability to absorb tariffs and maintain long waiting lists ensures continued demand, even as prices rise.

Mid-tier brands, however, face a steeper challenge. Companies like Tissot and Oris must innovate through sustainability and digital engagement. TAG Heuer's 2025 launch of a solar-powered bioplastic watch exemplifies how sustainability can reinvigorate brand appeal. Investors should monitor these brands' ability to adapt to Gen Z's demand for ethical production and digital-first experiences.

The pre-owned market represents a critical growth area. Platforms like Chrono24 and Rolex's Certified Pre-Owned (CPO) program are thriving, contributing to 16% of global luxury watch sales in 2025. Brands that successfully integrate into this ecosystem—offering transparency and value—will capture a larger share of Gen Z's spending power.

Conclusion: A Sector at a Crossroads

The Swiss watch industry stands at a crossroads. Tariffs and Gen Z's evolving preferences are forcing a reevaluation of traditional business models. For investors, the path forward lies in supporting brands that embrace digital innovation, sustainability, and the pre-owned market while maintaining the craftsmanship that defines Swiss luxury. As the sector adapts, those who navigate this transition with agility will emerge stronger in a post-tariff world.