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Last week, midway through the watch industry’s biggest trade show, Donald Trump announced 31% tariffs on Swiss imports. The proposed tariffs, enacted as of this morning, immediately became the focus of many discussions in Geneva between brands, retailers, and the press, at Palexpo and beyond.
The United States is the largest importer of Swiss watches in the world, so a new tariff of 31% on Swiss imports to the US has the potential to reshape not just the watch market in the United States, but the industry as a whole.
The announcement could not have come at a more pressure packed time. The entire watch industry – retailers, brands, manufacturing partners, collectors, and executives – was gathered in Geneva last week, doing the business that normally shapes the arc of the year. As the news was absorbed on Thursday, we witnessed brands and retailers reacting in real time, changing or solidifying plans as appropriate. The inescapable nature of the topic in meetings meant to showcase new products underscored the seriousness of Trump’s announcement, and the potential implications.
In seeking to understand the ramifications of the planned tariffs, we sought out an economist to help firm up our understanding of what the administration is seeking to accomplish. Brendan Cunningham is a professor of economics at Eastern Connecticut State University, and the author of Horolonomics, a website dedicated to “economic complications in watchmaking.” We started by defining our terms.
“A tariff,” Cunningham told me, “is a tax, usually charged by a national government, when someone imports a product produced in another country.” Most individuals do not really encounter tariffs on a day to day basis, so they can be a difficult concept to fully understand unless you happen to be in a business where you engage with them on a regular basis. “Tariffs are charged to businesses bringing in a large volume of products from abroad,” said Cunningham. “Those businesses will incorporate the tariff into their pricing when their products are sold at retail.”
“Tariffs are used to generate revenue for governments,” Cunningham continued. “In the modern era, they’re most popular in economies where tax evasion is rampant. Because it is easy to identify places where large volumes of products are entering (borders mostly) tariffs are a very enforceable manner of raising revenue. In most countries, though, tariffs have become a very unpopular source of revenue because they disproportionately tax people with the least income. Also, it is ‘settled science’ in the field of economics that tariffs and tariff wars are inefficient and wasteful.”
Much of the discussion among the media, collectors, and watch brands over the last week has been centered on the question of what happens next, and how this announcement and the tariffs themselves will impact the watch industry. While any specific predictions are pure conjecture, Cunningham, as an economist, sees limited options for Swiss brands, and only a few possible outcomes. “There are really only two options,” Cunningham told me, “pass through the tariff and charge more for watches in the US, or ‘eat’ the tariff and profit less on each watch sold.” Both options have obvious pitfalls. If brands raise prices, they are likely to sell fewer watches, and if they absorb the cost of the tariff, that could cut significantly into a brand’s profit. Over time, according to Cunningham, this has the potential to shutter a company. And if a full-on “tariff war” develops, it could lead to an environment in which a worldwide recession is possible, fundamentally destabilizing not only the watch industry, but world economies.
The experience of consumers who are planning to purchase a watch in an environment where tariffs have been implemented will ultimately be shaped by how retailers and watch brands coordinate to either absorb the cost of tariffs or agree on price increases. In these early days, most of the brands and retailers we talked to agreed that there are simply too many unknowns to say for sure what will happen next.
Steven Leed is the CEO of Royal Jewelers, an authorized dealer for Tudor, IWC, Oris, and several other brands, based in Andover, MA. Royal has been in business for over 70 years, and the company was founded by Leed’s father. Asked about the potential impact of the tariffs, Leed responded conservatively and prudently. “There is too much uncertainty and lack of information to properly assess the impact,” he told me in an interview. “We are watching closely the actions of Washington and how the world, the financial markets, and the brands react.”
Leed attended Watches & Wonders last week and described the tenor of the conversation within Palexpo as news of the tariffs spread. “The news broke in America at 4pm [Wednesday]. In Geneva it was 10 pm. When the show opened the next morning the watch brands seemed stunned. They had not had time to process the impact. No brand had answers, replying they had not seen guidelines and their legal staff would sort out the details. There was also optimism this will be a three or six month headache.”
Other retailers I spoke with preferred to remain anonymous for this story, but provided insight into the complexity of the situation and potential road ahead. One retailer indicated they sensed both peers in the retail space and brands shared a common goal of making the best of the situation, and finding ways to continue operations with as little disruption as possible to the experience of the end consumer. Not wanting to raise prices is a sentiment that was repeated several times over. This retailer was quick to remind me though that while authorized dealers are working very hard to mitigate increased costs, the ability to do so comes at the expense of the retailer. For independent brands in particular, there is often not enough in the margins for the manufacturer to absorb the full cost of the tariff, or for the retailer. The unfortunate downstream impact, then, is that it will be more difficult for these watches to be made and brought to market.
Still, I was told there is an overriding desire to somehow make this work, and at least some retailers are prepared to sacrifice some of their margin, at least temporarily, to maintain the status quo. A retailer observed that they have never seen such a concerted effort on the part of brands and retail partners as they have over the last week to resolve an issue facing the industry.
On the brand side, I found a variety of reactions to the news of the Trump tariffs. Gabriel Vachette, co-founder of Serica, expressed that even though his brand had been anticipating new tariffs, the rate was a shock. He also expressed frustration with the lack of information accompanying the announcement, describing a “complete lack of clarity around the actual strategy behind it all.”
“The method used to calculate these taxes is completely opaque and based on blatant falsehoods that only generate frustration and stress,” Vachette continued, “something the world could truly do without.”
Vachette anticipates a rocky road ahead. Tariffs “will certainly impact our sales,” he told me, “the US has always been a key market for us.” Vachette also recognized that US based customers will be most impacted by the tariffs. “Let’s be clear,” he said, “these political decisions will primarily hurt American consumers, who will have to bear the full consequences. What’s being framed as ‘punitive’ measures toward other nations is, in reality, just another tax burden on the American people.”
Interestingly, Vachette disclosed that Serica had been considering plans to develop a greater footprint in the United States. Those plans are now in flux. “One of our major plans for 2025 was to establish a US-based entity to strengthen our presence, offer the best possible service to our American friends, and manage this market with greater care and proximity. As of today…everything is up in the air.”
In terms of price increases, Vachette seemed to indicate that Serica may indeed have to increase the retail cost of his watches. “Given how tight our margins already are relative to our market positioning, we simply cannot absorb the financial impact of these new tariffs,” he said.
Reagan Cook is one of the founders of Vaer, a California based brand that sources components from Switzerland and Japan, while assembling watches in the United States. Cook is well versed in tariff concerns given the global nature of his business. He sees the proposed tariffs as deeply disruptive in the short term. “They significantly impact our cost structure – particularly for models that use Japanese or Swiss movements,” Cook explained. “In watch manufacturing, tariffs are assessed based on the origin of the movement, not the final assembly location. So even though we pay a meaningful premium to build the watch in America, the imported components are taxed in the same way as a fully finished watch arriving from Switzerland or Japan.”
Vaer, for their part, are actively trying to avoid a situation in which price increases are necessary, but that might mean not bringing products to market on the timetable they had originally planned. They also haven’t ruled out the possibility of raising prices on certain products, if necessary. “We’ve already paused several upcoming Swiss Made projects as we reassess pricing and margin scenarios,” Cook told me. “As a value-driven independent brand, we can’t simply pass on several hundred dollars in additional cost to the customer and expect demand to hold. The math—and the risk—is too severe.”
“As of now, we plan to move forward with most of our scheduled 2025 releases, though it’s likely we’ll need to raise retail prices on select models to offset the new costs.”
Cook sees the tariffs as a major obstacle for small independent and microbrands navigating a competitive market. “In my view, this policy will significantly reduce the size of the global watch market, and I expect it will trigger a wave of bankruptcy filings,” Cook predicted. “In this new environment, I believe the winners will be the brands that are simply able to endure.”
“Smaller independent brands will also face major challenges,” Cook continued. “Based on our own experience growing Vaer, you don’t make any real profit in the first few years. The entire premise of launching a watch brand through Kickstarter is to offer unmatched value to the community—to disrupt the market by sacrificing margins. This is not going to be a good time to start a watch company. There will be clear advantages for the current crop of independent brands—those with an established customer base, a reputation for quality, and a proven track record—because they’ll have more leeway to adjust pricing, communicate with their owners, and share intelligence with peers on how best to weather the storm.”
While many brands are understandably deeply troubled by the potential costs of tariffs, not all brands share the same concerns. R.T. Custer is the founder of Vortic and Colorado Watch Company, and has built both businesses on the strength of American manufacturing. Unsurprisingly, he has a slightly different outlook.
“These proposed tariffs don’t directly impact us in the traditional sense, since nearly everything we produce is made right here in the U.S.,” Custer told me. Something that has defined the mission of Custer’s brands is the idea of bringing watch manufacturing back to the United States at scale, so I was curious to hear his perspective on whether these tariffs might have some impact on that front. In short, Custer is skeptical.
“I can say from firsthand experience: it’s not something you can flip a switch on,” Custer explained, referring to the idea of reshoring a new watchmaking industry here in America. “Even if you handed me $100 million today and said, ‘Build the U.S. version of China’s watch industry,’ I’d say it would still take years. The machines I need take 6+ months to arrive. Skilled labor is in short supply. Infrastructure is aging or nonexistent. And it still costs 2–5x more to make a watch case here versus importing one.”
“So while I believe in the mission of building in America — and we’ve proven it’s possible — it’s a long, expensive road. And that brings up a valid fear: What if we all invest in reshoring, only to see the tariffs disappear in a few months?”
Custer’s view here seems to be in line with that of economist Brendan Cunningham’s. When I asked Cunningham about whether tariffs, which are designed in part to promote manufacturing in the country that levies them, are the best way to bring watch manufacturing back to the United States at scale, his response indicated there are far better alternatives.
“There are a wide variety of options when it comes to ‘industrial policies’ which governments can use to support various industries,” Cunningham explained. “One of the most popular among economists would be the use of subsidies, including tax breaks and low-interest lines of credit. These kinds of policies can simultaneously support the domestic production of certain items without raising the cost of those items for buyers. A lot of agricultural production is subsidized in the United States because the traditions and communities associated with farming are popular. Subsidies are preferred for economists because they are less inefficient (and they can be funded without disproportionately taxing those with the least means).”
The bottom line, according to Custer and others I’ve spoken with, is that the cost of making watches at scale in America is simply beyond the scope of what a tariff can influence. The tariffs, then, will not result in bringing watch manufacturing back to the United States, but are more likely to cause market instability, confusion, and frustration across the board, whether you’re a retailer, a brand, or a consumer.
This is a quickly evolving story, and the question of what happens next, which is what everyone wants to know, is impossible to say until tariffs are enacted or a trade deal is struck. R.T. Custer, though, has some degree of certainty as to how he’ll move forward. “I keep making watches in Colorado,” Custer told me. “I focus on telling our story. And I brace for the fact that when markets dip — like they are right now — luxury purchases slow down. That’s already happening.”
