Have Tariffs KILLED the Watch Market?

Summary

The recent US tariffs on Swiss-made watches are poised to significantly impact both the retail and gray markets. With tariffs potentially adding up to 41% to prices, US buyers face higher costs, but some may choose to buy overseas to avoid these hikes. The uncertainty in global financial markets could further dampen demand for luxury watches, especially for mainstream models. However, the independent watch market, catering to a more passionate and wealthy collector base, may remain largely unaffected due to limited supply and the specialized nature of the products. Overall, the tariffs may cause short-term disruptions but could ultimately lead to price adjustments and market shifts.

Takeaways

• 😀 Swiss watches exported to the US will face a 31% tariff, with an additional 10% baseline tariff, raising costs for consumers and dealers alike.
• 😀 US-based watch dealers are increasing asking prices on inventory in response to rising retail prices and new tariffs on imports.
• 😀 The higher tariffs could make Swiss watches significantly more expensive for US buyers, with potential price increases in both retail and gray markets.
• 😀 US consumers might travel overseas to buy watches directly to avoid tariffs, especially for high-value pieces where the cost savings justify travel expenses.
• 😀 The watch market may experience short-term price increases in the US, but the long-term impact will depend on how many customers are willing to pay the higher prices.
• 😀 Economic conditions such as rising market fear and uncertainty in crypto and stock markets are contributing to decreased demand for mainstream luxury watches.
• 😀 If tariffs remain long-term, the global economy could be significantly impacted, leading to further reduced demand for luxury watches and potentially driving prices down.
• 😀 The independent watch market, especially niche and rare pieces, is likely to be more resilient due to limited supply and passionate collectors.
• 😀 Collectors of rare independent watches may still be willing to travel to purchase pieces, minimizing the impact of tariffs on this market segment.
• 😀 Despite broader economic declines, sales in the independent watch sector are still strong, with clients purchasing high-end pieces and making reservations.
• 😀 While US retailers may suffer from tariffs, international dealers who rely heavily on the US market are also likely to be significantly impacted by the new measures.

Q & A

What is the impact of the newly imposed US tariffs on Swiss watches?

The new US tariffs on Swiss watches consist of a 31% tariff and an additional 10% baseline tariff, significantly raising the price of Swiss watches. This will make them more expensive for US customers, whether purchased locally or imported from overseas.

How do the tariffs affect the retail side of the watch market in the US?

The tariffs are likely to increase retail prices in the US. Dealers are raising their asking prices, anticipating that the higher tariffs will lead to increased costs for imported watches. This will particularly affect the retail market for Swiss watches.

What role does the grey market play in the impact of these tariffs?

The grey market is also affected by the tariffs as it relies on importing watches from overseas. The additional taxes will make it more expensive for dealers to offer watches from Switzerland, potentially raising grey market prices as well.

Will US consumers be willing to pay higher prices due to the tariffs?

It is unclear whether US consumers will be willing to pay the higher prices. Some might opt to purchase watches locally, while others may travel abroad or use services like shipping to avoid the tariffs, especially if they feel the price increase is too high.

What potential actions might US collectors take in response to the increased prices?

US collectors may either decide to purchase locally at the higher prices or travel overseas to pick up their watches, which could still be cheaper despite the added travel costs. Some may also choose to delay their purchases altogether if they feel the prices are too high.

How could the tariffs affect demand for mainstream luxury watches in the US?

Demand for mainstream luxury watches like Rolex or Patek Philippe could drop if consumers feel economic uncertainty or fear about the future. The tariffs could compound this by increasing prices, leading to even less demand in the face of other economic concerns.

What long-term effects might the tariffs have on the global economy and watch market?

If the tariffs are long-term, they could have a significant impact on the global economy by causing uncertainty in financial markets. This could lead to lower demand for luxury watches, particularly in markets like the US, which could further depress prices in the mainstream watch sector.

How will the independent watch market be impacted by these tariffs?

The independent watch market is expected to be less affected by the tariffs. Collectors in this market are typically more passionate and may be willing to pay higher prices or travel to acquire these rare pieces. The limited supply of independent watches also provides resilience against price fluctuations.

Why are independent watches less likely to be impacted by tariffs compared to mainstream watches?

Independent watches are less impacted because their demand is driven by collectors' passion rather than price. These collectors often seek rare pieces, and the high value and limited production of these watches make them less susceptible to market fluctuations caused by tariffs.

What is the speaker's opinion on the long-term sustainability of the tariffs?

The speaker believes that the tariffs are more likely to be a short-term negotiation tool rather than a permanent change. Based on past trade wars, there is a possibility that the tariffs will be revised or lifted quickly if political pressures or negotiations lead to concessions.