In Geneva, Luxury Watch Leaders Brace for US Tariffs Impact

GENEVA — At Geneva Watch Days last week, luxury watchmakers gathered to show off their latest wares — and put on a brave face. The show, which ran through Sunday, brought together 66 exhibitors and a projected 20,000 visitors, many of them looking for signs of the industry’s response to a crisis some chief executives have described as “the perfect storm.”

So far, the Swiss watch industry has yet to feel the full effect of the 39 percent tariffs imposed on exports from Switzerland to the US by President Trump last month. Larger brands such as Rolex and Omega front-loaded inventories in July, warping official Swiss export figures. According to the Federation of the Swiss Watch Industry, exports to the US are up 24.1 percent over last year, bucking the industry’s downward trend.

Many brands have stockpiled two or three months’ worth of watches Stateside to delay price rises, but have admitted that if a deal can’t be found to reduce the levy before stocks run dry that further cost rises are inevitable. As a loose rule, chief executives have said they plan to split increases with customers, raising prices while cutting margins for themselves and their retail and distribution partners. A number of top Swiss brands, including Rolex, Omega and Patek Philippe have already increased prices by between 3 and 10 percent since tariffs were first announced in April. Trump’s appearance in the Rolex suite at Sunday’s US Open final had the look of a Swiss diplomacy mission: Rolex is by far Switzerland’s largest watchmaker and heavily exposed to the US market.

In Geneva, a local politician expressed dismay at the tariffs. “It’s quite shocking to have the European Union at 15 [percent] and we have 39 [percent],” Delphine Bachmann, Geneva’s minister for the economy and employment said at a press conference to launch the watch event. “The US is one of our first markets and 15 percent of our exports go there.”

Bachmann said Swiss authorities had extended the state-backed RHT mechanism — short working hours — from 12 to 24 months to protect the country’s skilled watchmaking workforce. It’s thought the industry employs around 65,000 people. ”We had very good post-Covid years,” she said. “We are now working with industries and with authorities to change the situation.”

Breitling chief executive Georges Kern said the industry had to hope for the best but prepare for the worst. “The [US] president decides what the president decides,” he said. “I’m still confident that this will be resolved in the next weeks and months. I cannot imagine Switzerland with 39 percent tariffs, so let’s stay positive and have a plan B.”

For brands based outside Switzerland but using Swiss components, the picture was even less clear. “We are still looking at it to understand how this complex situation will be articulated,” said the British brand Bremont’s chief executive Davide Cerrato.

While Bremont assembles and tests its watches in the UK, it imports movements from Switzerland, which may yet make its watches subject to US export duties. “It’s super complex,” Cerrato continued. “We have an affiliate in the US so at least we can play a little bit on transfer prices.” Cerrato said around 25 percent of Bremont’s revenues are generated in the US and that its business in the country was up 60 percent year-on-year.

Cerrato said he was aware that by continuing to export to the US under the 10 percent levy negotiated with the US by the UK, he may be landed with additional tax obligations down the line. “We don’t know,” he said. “Everyone is waiting for the Supreme Court to see if they will change it. The US is really the market that could allow us to scale up.” (A US appeals court recently ruled that many of Trump’s tariffs are illegal and the matter is now likely to go before the country’s Supreme Court).

Some smaller brands who hadn’t been able to divert stock to the US over the summer said the impact of the tariffs had been negligible. Louis Erard sells half its watches direct-to-consumer online, of which one third go to the US, according to its chief executive Manuel Emch. “Fact is, it [the tariffs] didn’t change anything,” he said. “Clients paid tariffs up front. We launched a watch at 5,000 Swiss francs, which is now $10,000 with the tariffs and the sales tax. But I haven’t sold any less than before.”

Like many of his fellow senior executives at Geneva Watch Days, Emch said that while tariffs looked bad on paper, they were “a business reality” the industry would have to get used to. “I’m fed up with my colleagues who say, ‘Oh, we need support, we need help, it’s terrible,’” he said. “I mean, come on, this is the entrepreneurial spirit, and we have to adapt to these realities.

One mid-range Swiss brand chief executive exhibiting in Geneva said his volumes had doubled in the past year because he had built his strategy around India. “We were at 4,000 [watches], now we are at 8,000,” said Patrik Hoffmann of Favre-Leuba, which sells watches between roughly $2,500 and $5,000. “This is because we have focused on India, where the conditions [for export] are much better.” Favre-Leuba was revived two years ago with backing from the Indian company Silvercity Brands, a subsidiary of the Indian conglomerate KDDL, and according to Hoffmann now does “much more than half” its business in the country, with very little exposure to the US.

Meanwhile, the industry continued to struggle to bring in new, younger clients. “It’s harder to attract younger clients than it is in better times, and this is why most of the luxury markets today behave very similarly, with the high-end growing more than ever, and the entry suffering more than the medium,” said Jean-Christophe Babin, chief executive of LVMH Watches and of Bulgari.

But Babin said he believed this was a question of consumer confidence and not appetite. “In times of uncertainty, this is typically a group that will be more hesitant and probably postpone the purchase to next year, feeling that next year will be better,” he said. “It’s difficult to be worse than this year.”

He said Swiss companies would have to stay the course while the storm blew over. “We have to be very consistent and disciplined, but at the same time innovative,” he said. “And we have to ensure that the perceived value of new product is higher than the price.”

Geneva Watch Days was set up in 2020 in response to the pandemic and the cancellation of the major watch fairs. Exhibitor numbers have more than tripled since. The show’s organisers said its cost-effective “decentralised” approach made sense to brands beset by macro-economic challenges. Event co-founder Babin said the event would cost a total of 3 million Swiss francs, covering the activities of all 66 exhibiting brands.

Babin added that Geneva Watch Days had also unintentionally found a useful niche in the calendar. “The strength of Geneva Watch Days is its timing,” he said. “It’s just before the highest consumption period for cultural reasons. We have Golden Week, which, in Asia is a very important moment of gifting. In India, a few weeks later you have Diwali, another big moment. Then in the US, thanksgiving, before Christmas.”

This year, exhibitors included LVMH watch division brands TAG Heuer and Zenith for the first time, although not sister brand Hublot. TAG Heuer chief executive Antoine Pin said the show fell at “the perfect time” and was “probably more efficient vis-a-vis the customers, because we are dropping our novelties progressively [through the year] and not just at once.”

Pin added that the show’s informal set-up showed a more approachable side to Swiss watchmaking, too. “It’s a very convivial and authentic way to interact with our clients and to give a different image of our industry, with more proximity,” he said. “This has not always been the case.”