Trump's 39% Tariffs and the Swiss Watch Industry: A New Era for Luxury and Pre-Owned Markets

The imposition of a 39% tariff on Swiss luxury watch exports by the Trump administration in August 2025 has sent shockwaves through the global luxury sector. This move, one of the highest in the developed world, targets Switzerland's iconic watch industry, which accounts for 17% of its total exports and underpins a $38.5 billion U.S. trade deficit. While the immediate economic pain is evident—projected mid-single-digit declines in Richemont's pre-tax earnings and a near-40% drop for the Swatch Group—the long-term implications reveal a strategic shift in consumer behavior and sector positioning. Investors must now weigh the fragility of primary markets against the resilience of pre-owned ecosystems.

The Tariff's Economic Shockwave

The 39% tariff, calculated to mirror the U.S.-Swiss trade deficit, has forced Swiss watchmakers to recalibrate their pricing strategies. Analysts estimate that final consumer prices for new watches could rise by 12–14%, with models like the Tissot PRX and Rolex Submariner seeing price jumps of $100–$1,100. For brands like Rolex and Patek Philippe, which operate at near-full capacity, absorbing costs or passing them on to consumers is manageable. However, mid-tier brands such as Oris and Tissot face existential risks, as their margins are thinner and U.S. demand is more price-sensitive.

The tariffs also threaten to fragment the U.S. market. With new watches becoming prohibitively expensive, consumers are pivoting to pre-owned and vintage options. Certified pre-owned (CPO) programs, such as Rolex's, are expected to expand rapidly, while independent dealers like Bob's Watches and Loupe This report a 30% surge in pre-owned sales in 2025's first half. This shift is not merely a temporary workaround—it signals a structural realignment in how luxury consumers access high-end goods.

Strategic Sector Positioning: Diversification and Adaptation

Swiss watchmakers are responding with a mix of geographic diversification and supply chain adjustments. Richemont, for instance, has redirected allocations to the Middle East and Asia, where demand remains robust. Its Q1 2025 results show 17% growth in the Americas (excluding the U.S.) and the Middle East, underscoring the potential of untapped markets. Meanwhile, smaller brands like Zeitwinkel are exploring production relocations, though this risks diluting the “Swiss-made” brand equity that underpins their value.

The pre-owned market, however, is emerging as the sector's most dynamic force. With tariffs creating a price gap between new and used watches, secondary markets are gaining traction. For example, a 2023 Rolex Daytona that cost $15,000 in 2022 now commands $22,000 in the pre-owned space—a 47% premium. This trend is not limited to Rolex; Patek Philippe and Audemars Piguet are also seeing their vintage models appreciate as buyers seek alternatives to tariff-impacted new stock.

Consumer Behavior Shifts: From Exclusivity to Accessibility

The tariffs are accelerating a broader cultural shift in luxury consumption. Historically, Swiss watches were symbols of exclusivity, with new releases allocated to a select few. Today, the pre-owned market is democratizing access, allowing buyers to acquire iconic models at a fraction of the new price. This shift is particularly pronounced among younger consumers, who prioritize sustainability and value over brand-new ownership.

Moreover, the tariffs are pushing U.S. retailers to innovate. Some are opening auction offices in Hong Kong and Dubai to circumvent tariffs, while others are leveraging digital platforms to connect buyers with global inventory. This geographic and digital fragmentation could redefine the luxury watch distribution model, favoring agile players over traditional brick-and-mortar retailers.

Investment Implications: Navigating the New Normal

For investors, the key lies in identifying companies that are adapting to these changes. Here's how to position a portfolio:

1. Prioritize Pre-Owned Market Players: While most pre-owned dealers are private, public companies like Richemont (RICH.LUX) and Swatch Group (SWCH.SW) are expanding their CPO programs. These brands are likely to benefit from the growing demand for certified pre-owned watches.
2. Bet on Geographic Diversification: Watchmakers with strong presence in the Middle East, Asia, and Latin America—such as Richemont and LVMH (LVMHF.PK)—are better insulated from U.S. market volatility.
3. Monitor Currency and Tariff Risks: The Swiss franc's 12% appreciation against the dollar since 2024 has compounded the impact of tariffs. Investors should track the SNB's interventions and the potential for further devaluation to offset trade pressures.
4. Short-Term Volatility, Long-Term Resilience: While the tariffs will likely cause near-term earnings declines, the sector's long-term fundamentals remain intact. Swiss watches are durable, high-margin assets, and the pre-owned market's growth could offset primary market losses.

Conclusion: A New Chapter for Swiss Luxury

Trump's 39% tariffs have disrupted the Swiss watch industry, but they have also catalyzed innovation. The rise of the pre-owned market, geographic diversification, and digital transformation are creating new opportunities for investors. While the immediate pain is real, the long-term trajectory suggests a sector that is not only resilient but evolving to meet the demands of a changing world. For those willing to look beyond the headlines, the Swiss luxury watch industry offers a compelling case study in adaptation and reinvention.