U.S. Duties on Swiss Watches and the Impact on the Swiss Franc
U.S. Tariff Policy on Swiss Watches
On April 2, 2025, President Donald Trump announced a significant tariff policy targeting Swiss imports, including a 31% duty on luxury watches, as part of his “Liberation Day” trade strategy. This policy imposed a 10% universal tariff on all U.S. trading partners, with additional “reciprocal” tariffs on countries like Switzerland, which the administration claimed imposed high duties (up to 61%) on U.S. goods. By August 1, 2025, the reciprocal tariff on Swiss goods escalated to 39%, one of the highest globally, surpassed only by Laos, Myanmar (40%), and Syria (41%). These tariffs apply to the import value of Swiss watches, significantly affecting their cost in the U.S., the largest market for Swiss timepieces, accounting for 16.8% of Swiss watch exports (approximately $5.2 billion in 2024).
The tariffs, effective from April 9, 2025, with a temporary reduction to the 10% blanket rate until July 9, 2025, prompted a surge in Swiss watch exports to the U.S., with a 149% increase in April 2025 as retailers rushed to stockpile inventory before the higher levies. However, the Federation of the Swiss Watch Industry warned that this was an “exceptional” event, and global demand remains under pressure, with exports to China and Hong Kong declining. The 39% tariff, set to take effect on August 7, 2025, unless a trade deal is reached, is expected to raise retail prices by at least 20%, impacting brands like Rolex, Patek Philippe, and Omega, as well as mid-range marques like Longines and Tissot. Swiss watchmakers, unable to relocate production to the U.S. due to infrastructure and expertise constraints, face challenges absorbing these costs, potentially leading to reduced margins or higher consumer prices.
Impact on the Swiss Franc
The Swiss Franc (CHF), often referred to as “Franco” in some contexts, has faced significant pressure due to these tariffs, though the term “collapses” exaggerates the situation. The announcement of the 31% tariff in April 2025 led to immediate market reactions, with the U.S. dollar rallying against safe-haven currencies, including the CHF. While financial markets in Switzerland were closed for a national holiday on August 1, 2025, the broader economic impact of the tariffs has been felt. The Swiss watch industry, contributing 6.62% ($29.53 billion) of Switzerland’s $446.30 billion total exports in 2024, is a critical economic driver. The tariffs threaten this sector, with analysts at Jefferies Global Research and Strategy predicting price hikes and potential demand drops, which could weaken Switzerland’s trade balance.
The CHF’s value is closely tied to Switzerland’s export-driven economy, and the tariffs exacerbate existing challenges, such as a post-pandemic slump in global demand and a real estate crisis in China, a former key market for Swiss watches. Posts on X and reports from Reuters noted a 4-6% drop in shares of Swiss luxury conglomerates like Richemont and Swatch Group following the April tariff announcement, reflecting investor concerns about export revenues. While the CHF has not “collapsed,” it has depreciated against the USD, with the USD/CHF exchange rate reflecting a stronger dollar due to tariff-related trade tensions. For instance, a Bloomberg report from April 2025 highlighted a slide in European luxury stocks, indirectly pressuring the CHF.
Switzerland’s government, led by President Karin Keller-Sutter, has expressed regret over the tariffs and is pursuing a trade deal to mitigate the 39% levy before August 7, 2025. The Swiss Federal Council argues that 99% of U.S. goods enter Switzerland duty-free, challenging the U.S. rationale for reciprocal tariffs. Negotiations are ongoing, with U.S. Treasury Secretary Scott Bessent indicating in May 2025 that Switzerland is a priority for a trade agreement. However, without a deal, the economic strain could further weaken the CHF, particularly if U.S. demand for Swiss watches falters, reducing export revenues.
Broader Implications
The tariffs have sparked fears of a trade war, with Switzerland’s business lobby calling them “harmful and unjustified.” The U.S. trade deficit with Switzerland ($38 billion in 2024) is a key justification for the tariffs, but critics argue that taxing watches won’t boost U.S. watchmaking, as no significant domestic industry exists. Instead, consumers may face higher prices, with a $15,000 Rolex potentially rising to $19,650 after a 31% tariff. Some collectors are turning to pre-owned watches already in the U.S. to avoid duties, boosting platforms like SwissWatchExpo and Bob’s Watches. Others may travel to regions like the Caribbean or Canada for better pricing, though this carries legal risks if not declared properly.
Economists remain skeptical of the tariffs’ effectiveness, noting that they could reduce U.S. GDP by 6% and wages by 5% over a decade, according to the Penn Wharton Budget Model. For Switzerland, the tariffs threaten not only the watch industry but also the broader economy, given the sector’s role in supporting 400,000 U.S. jobs through Swiss investments. The CHF’s stability hinges on a swift resolution, but as of August 1, 2025, no agreement has been finalized, leaving the Swiss watch industry and the Franc under continued pressure.