The first half of 2025 has been a pile-on of adverse circumstances for Swiss watchmakers, between flipping foreign exchange rates, weakening global demand — especially in China — and record gold prices.

Will the new U.S. tariff on Swiss-made goods be the proverbial straw that will break the camel’s back?

After the shock announcement of a higher-than-anticipated 39 percent rate on Swiss-made products by U.S. President Donald J. Trump on July 31, coincidentally the eve of Switzerland’s national holiday, the question loomed large over the traditional summer break of the watchmaking industry.

When no reprieve materialized ahead of the Aug. 7 deadline, despite 11th-hour talks between a Swiss delegation that included the country’s President Karin Keller-Sutter and economics minister Guy Parmelin, and U.S. representatives, the question turned to how long levies would remain at the current level.

“First of all, everyone assumes that Switzerland will manage to work out a better deal more in line with what the U.K., the European Union and Liechtenstein — [which] shares a customs agreement with Switzerland — meaning that the consensus is that the 39 percent shouldn’t be the last word,” said Oliver R. Müller, a watch adviser and analyst who founded consulting firm LuxeConsult.

A deal may emerge from negotiations around other export categories such as pharmaceutical products and gold.

In the meantime, watchmakers have already been adapting since April 2, starting with anticipatory exports to the U.S., which began in the wake of the initial announcement by Trump and returned in July.

Shipments so far have built to a six-month buffer, said Bernstein luxury analyst Luca Solca in a recent research note. Some brands also opted to lower margins. Moderate price increases have been affected by many, including Rolex, Patek Philippe and Audemars Piguet.

According to Müller, “whatever the final negotiations [with the U.S.] will come out with, we will have to comply with a higher rate than the 10 percent we managed since April.”

But all eyes are on what comes when that finite quantity, limited by production volumes and shipping space, runs out while the rate is still at its current level.

Who will bear the additional cost, between brands and retailers — and how much will end up on consumers?

Until now, the midsingle- to low-double-digit range pointed to the idea that a negotiated rate was expected in the 20 percent range.

“I don’t believe tariffs will stay at 39 percent for long,” said François-Henry Bennahmias, former chief executive officer of Audemars Piguet. “At one point we will come back to something more decent.”

With the U.S. as the top market for Swiss watches, it would be “an enormous error” to turn away from it and the seasoned executive advised brands to ride out the storm.

Chief among the reasons to stay the course is that succor won’t come from other geographic horizons. “No other market can individually be compared with the U.S., which is [the industry’s] biggest export market with roughly 17 percent of the total sales,” noted Müller.

Top independent brands, including Rolex and Audemars Piguet, are highly dependent on the American market, according to data from Geneva-based Digital Luxury Group cited by Bernstein. Compagnie Financière Richemont comes next, followed by the Swatch Group and LVMH Moët Hennessy Louis Vuitton.

Watchmakers are not equal in the face of U.S. tariffs but “there will be no winners,” Müller continued.

“All brands will have to absorb that additional duty somehow by either reducing their margin or increasing their retail prices by an estimated 12 to 14 percent depending on the transfer price from the brand to their U.S. distributor [or] subsidiary,” he said.

Entry and midlevel brands can expect to feel the crunch more sharply than their higher-priced counterparts, who can count on price elasticity. Those going through wholesale structures have more wiggle room than direct-to-consumer actors.

Price increases are likely at most brands, and could extend globally as companies try to avoid creating too great a price difference between territories.

In an analyst call on Aug. 27, RBC’s Piral Dhadania said Swatch Group CEO Nick Hayek had indicated the company’s readiness to effect “a 5 [to] 10 percent U.S. price increase” that would “fully offset the impact … along with help from transfer price, affiliate and retailer margin absorption.”

Some have taken steps to reshape their operations to lessen the tariffs impact on consumers, such as U.K.-based brand Christopher Ward, which produces its timepieces in Switzerland and prior to Aug. 7, shipped them directly to its U.S.-based clients.

The company said last week it would “roll back” prices by 29 percent thanks to a corporate restructuring that included transforming its long-standing U.S.-based entity into its distributor for the territory.

CEO Mike Frank said the move had been on the table “for some time” but that the recent tariffs had precipitated its implementation.

“We’ve seen some positive early signs that these changes are bearing fruit in these difficult circumstances,” added the Christopher Ward executive.

Stakes are high — and go beyond brands’ bottom lines. With 65,000 jobs across the sector, according to 2023 figures from the Employers’ Association of the Swiss Watchmaking Industry, the country can ill afford a catastrophic scenario to play out.

Neither can the industry. The end of pandemic-driven euphoric growth has created instability as suppliers that rushed to meet inflated demand find themselves mired in difficulties. Despite the best efforts of larger players to shore up possible loss of expertise through investments, not all may emerge unscathed.

There are encouraging signs. For one, the appetite for watches in the U.S. hasn’t cooled so far. Bernstein’s Solca noted it remained “strong” in the second quarter of the year.

In a trading update of its annual general meeting published Wednesday, Watches of Switzerland said it had “seen consistently strong trading” in the 18 weeks to Aug. 31, “particularly in the U.S. despite the announcement of increased tariffs on Swiss imports.” E-commerce sales in the country have also seen “good growth” following an upgrade.

It also did not anticipate any material impact from U.S. tariffs on its first-half results, given increased inventories from brands, amounting to what Deutsche Bank characterized as “an encouraging update.”

Ahead of the sixth edition of the Geneva Watch Days, the roster of 66 brands bringing novelties to the now established mid-year rendezvous for consumers, press and enthusiasts, felt like another effort by brands to stay the course.

At the opening conference on Wednesday, Breitling CEO Georges Kern reminded that the tariff situation hinged mainly on Trump himself. With this on board, “let’s stay positive, let’s have a plan B,” he said.

– With contributions from Samantha Conti.