The financial world is watching closely as a new trade policy unfolds, with Watches of Switzerland Group Plc feeling the immediate pain. The retailer’s shares plummeted by as much as 6% after US President Donald Trump imposed a 39% tariff on imports from Switzerland, one of the steepest rates in his global trade war. The company, a key seller of Swiss timepieces like Rolex, is now facing a significant challenge to its business model.
The steep drop in the company’s stock price reflects investor concerns about the tariff’s impact on its US operations. The duty threatens to significantly increase the cost of its products, potentially leading to a decline in sales. While Watches of Switzerland was hit hard, major Swiss manufacturers like Swatch Group and Richemont were given a temporary reprieve, as Swiss financial markets were closed for a public holiday.
The current trade situation is a continuation of a volatile period for the Swiss watch industry. Earlier in the year, a threatened 31% tariff had already caused a rush in exports as importers tried to get ahead of the duties. This was followed by a lull as optimism for a more moderate tariff rate grew. The new, more severe 39% rate has now created a fresh wave of concern and uncertainty.
Looking ahead, analysts are forecasting dire consequences if the tariff is enacted. Jefferies analysts warn that a 39% duty could lead to price increases of over 20% for American consumers. This would be a major blow to a market that is already facing headwinds from “luxury fatigue.” The one-week delay until the tariff’s implementation, however, has led to speculation that this is a strategic move, a powerful “negotiating tactic” aimed at securing concessions from Switzerland.