(Bloomberg) — Shares of Watches of Switzerland Group Plc fell as much as 7.3% after US President Donald Trump imposed a 39% tariff on imports from Switzerland, one of the steepest rates globally in his escalating trade war.
The retailer, which sells Rolex and other Swiss timepieces in the UK and the US, bore the brunt of the latest tariff salvo. Financial markets in Switzerland are closed for a national holiday, initially sparing listed timepiece makers such as Richemont and Swatch Group AG. The US is the biggest market for Swiss watches.
The levies slapped on Switzerland are part of a slew of new tariffs unveiled by Trump on Thursday as the US president forges ahead with his effort to reshape international commerce. Two other pillars of Swiss industry, pharmaceutical companies Novartis AG and Roche Holding AG, have also been hit by an additional shock as they were among 17 of the world’s largest drugmakers to receive letters from Trump insisting they immediately lower what they charge for Medicaid for existing drugs.
The stock of the UK-traded Watches of Switzerland, which became a proxy on Friday for Swiss tariff woes, are down 19.5% in the 12 months through today amid an industry-wide slump in demand.
Swiss watch exports had already been hit in advance of the latest news, briefly surging in the spring as importers tried to get in ahead of the tariffs when Trump threatened a 31% levy, then easing on hopes of a settlement at a lower rate.
Swiss watch exports dropped by almost 10% in May, led by a slump in shipments to the US.
It’s the latest blow to the watch industry as demand for luxury has been declining with reduced appetite particularly in China, changing consumer trends and uncertainty from Trump’s tariff wars. Sales of expensive timepieces have weakened since the post-pandemic boom ended and prices of used luxury watches surged.
Swiss watch companies also struggled with high metals prices last year and a number of them turned to a government-backed furlough program called short-time work to help see them through. The industry has also been struggling with the high cost of the strength of the Swiss franc.
If the 39% tariff goes ahead, it could require price increases of more than 20% in the US, according to Jefferies analysts led by James Grzinic. There’s also a possibility that the tariffs don’t go into effect.
“The one-week hiatus until implementation suggests this could be a negotiating tactic,” he said in a note.
Richemont’s specialist watchmakers division, which includes labels such as Jaeger-LeCoultre and Piaget, saw sales drop 7% in the latest quarter, though the company has been bolstered by the resilience of its jewelry operations.
