The stock market is once again on edge, with Watches of Switzerland Group Plc’s shares falling by as much as 6% after US President Donald Trump unveiled a new 39% tariff on imports from Switzerland. This steep tariff rate, which is one of the highest in the world, has directly hit the retailer, a major seller of Swiss watches in the UK and US. The company’s financial health is now a subject of intense investor scrutiny.
The stock’s sharp decline highlights the company’s direct exposure to the US market, where the new tariff threatens to significantly increase the cost of its core products. The immediate market fallout was primarily focused on the retailer, while major Swiss-based manufacturers like Richemont and Swatch Group AG were spared from the day’s trading due to a national holiday. This has given them a temporary shield from the market’s initial reaction.
The new tariff is the latest development in a period of intense volatility for the Swiss watch industry. Earlier in the year, a threatened 31% tariff had led to a temporary surge in exports as importers rushed to build up stock. This was followed by a cooling off as hopes for a more favorable outcome grew. The new 39% rate now dashes those hopes and signals a new level of aggression in the ongoing trade disputes.
According to analysts at Jefferies, the full implementation of the 39% tariff could lead to price increases of more than 20% for consumers in the US. This would be a significant blow to the luxury watch market, which is already facing headwinds. The one-week delay until the tariff’s implementation, however, has led to speculation that it is a strategic maneuver. Jefferies analyst James Grzinic believes this is a “negotiating tactic” that leaves open the possibility of a last-minute reversal.