Market volatility surged as Watches of Switzerland Group Plc’s shares dropped by as much as 6% in response to a new trade policy from the US. President Donald Trump has imposed a 39% tariff on imports from Switzerland, a move that has sent shockwaves through the luxury retail industry. The company, a key retailer of Swiss watches in the UK and US, is seen as being particularly vulnerable to this new, exceptionally high duty.
The company’s significant presence in the US market makes it a primary target for the fallout from the tariff. Investors quickly reacted by selling off shares, reflecting their concerns about the potential for squeezed profit margins and dampened sales. While Watches of Switzerland took the direct hit, larger Swiss watchmakers like Swatch Group AG and Richemont were shielded from the initial market turbulence due to a national holiday that closed Swiss financial markets.
This new tariff is a dramatic development following a period of significant trade uncertainty. Earlier in the year, a threatened 31% levy had already caused a rush in exports as importers sought to pre-emptively acquire stock. This was followed by a drop-off in shipments as hopes for a lower tariff rate grew. The new 39% rate now represents a more severe and definitive challenge to the industry’s stability.
The potential for a steep price increase is now a major concern. According to Jefferies analysts, a 39% tariff could lead to price hikes of over 20% for US consumers, making luxury watches significantly more expensive. The situation is further complicated by a broader downturn in consumer sentiment, a phenomenon described as “luxury fatigue” by Vontobel analyst Jean-Philippe Bertschy. The one-week delay until the tariff’s implementation suggests it might be a last-minute negotiating tactic, a final roll of the dice in a high-stakes political game.