By Helen Reid
LONDON/GENEVA (Reuters) -As a U.S. tariff deadline neared this week, Swiss watch manufacturer DuBois et fils rushed to ship five high-end watches worth thousands of dollars each to the United States. By Wednesday the firm had blocked orders on its U.S. website. Now CEO Thomas Steinemann is calculating the price hikes he’ll need to make.
The whipsaw week for the Swiss horologist, as U.S. President Donald Trump slapped a surprise 39% trade tariff on imports from the European country, underscores how businesses big and small are being forced to adapt and rejig operations under pressure.
DuBois et fils, founded in 1785, accelerated shipments on Monday from its factory in Muttenz, near Basel, to get through customs before the U.S. tariff on imports from Switzerland came into force.
The 39% rate – up from the baseline tariff rate of 10% since April – took effect at 0400 GMT on Thursday after the Swiss president came back from an emergency trip to Washington without a deal.
“For the watch industry it’s a huge disaster,” said Steinemann, who explained that he’d blocked U.S. orders because prices would need to be recalculated to account for tariffs. The firm would not soak up the hit, he said.
“The U.S. was a big driver in the last two years. Now this kills a lot of the business.”
His U.S. prices were going to rise, he added. The DuBois DBF008 watch, for example, would likely go up to $14,500, from $10,800. The United States accounts for around 15% of the global sales of DuBois, which sells directly to U.S. consumers.
The wider Swiss watch industry is feeling the pinch, planning price hikes, pausing U.S. orders, and looking for alternative markets for its expensive, hand-made timepieces. The country is home to brands such as Rolex, Patek Philippe, LVMH-owned Tag Heuer, Swatch-owned Omega and IWC Schaffhausen, owned by Richemont.
The U.S. accounted for 17% of Switzerland’s total 26 billion Swiss francs ($32 billion) of watch exports last year, according to the Federation of the Swiss Watch Industry. Exports to the U.S. surged in April as watchmakers frontloaded shipments ahead of a first tariff deadline.
‘LOSS FOR THE UNITED STATES’
Combined with a weaker dollar against the Swiss franc, the tariff hike will make Swiss watches some 65% more expensive on average for U.S. consumers, estimated Amarildo Pilo, owner of Pilo & Co watchmakers.
He said that many brands had already shipped some product to the U.S. in advance, but warned this was not a long-term solution. The United States had been a market that everyone was focusing on recently and wanted to develop, he added.
“My personal opinion is that what’s going to happen is that Americans will no longer buy watches in the United States,” said Pilo, who is also founder of the Swiss Independent Watchmakers Pavilion, which represents 28 independent brands.
“But those who want them and who like watches will buy them elsewhere. So honestly, it’s a loss for the United States.”
The tariff hit is a wider broadside against Switzerland, even if talks are continuing with the hope of eventually striking a deal. Trump argues that tariffs are needed to undo trade distortions and bring manufacturing back to the United States.
“The impact could be very strong on the Swiss economy,” said John Plassard, partner and head of investment strategy at Cite Gestion Private Bank. Analysts estimate the tariffs could knock between 0.3% to 0.6% off Swiss GDP growth over the next year.
“It will cut the potential growth in half, I would say. So the indirect impact could be more unemployment in the Swiss economy,” said Plassard.
‘GAME OVER NUMBER’
In Sacha Davidoff’s vintage watch boutique in Geneva, there was a sense of shock. Many in the country had expected a deal similar to or better than the 15% that will be levied on most imports from the European Union. Switzerland is outside the bloc.
“Right now we’re living the nightmare that we had hoped wouldn’t come to be. You kind of like wake up in the morning and you’re like, ‘no, that wasn’t real’,” Davidoff told Reuters, saying that 39% was a hammer blow for exports.
“(It) is kind of a ‘game over’ number for us. It basically cuts the U.S. market as a possibility for export of vintage watches entirely.”
He hoped, however, that the situation would be resolved eventually.
“I think that this is just going to be a difficult period where we’re basically going to have to put the American market kind of on pause and focus on domestic sales,” he said.
($1 = 0.8070 Swiss francs)
(Reporting by Helen Reid in London, Dominique Patton in Paris, Olivia Le Poidevin in Geneva, and Lewis Macdonald and Manuel Ausloos in Geneva, Editing by Adam Jourdan and Rosalba O’Brien)
Comments