The Luxury Watch Market: A Resilient Investment Amidst Tariffs and Economic Uncertainty

In recent months, the luxury watch market has seen a remarkable surge in interest, particularly in the United States. As affluent consumers scramble to acquire high-end timepieces, the dynamics of this market are being reshaped by external factors, including tariffs and economic volatility. This article delves into the current state of the luxury watch industry, exploring the reasons behind its resilience and the implications of recent developments.

A Surge in Demand

According to a report from the Federation of the Swiss Watch Industry, Swiss watch exports experienced an impressive growth of 18.2% in April. The United States played a pivotal role in this surge, accounting for nearly $1.03 billion (851.9 million Swiss francs) in watch imports. This influx has provided a much-needed boost to a global market that has been struggling in recent years.

The federation attributes this spike in exports to early shipments, driven by the anticipation of increased U.S. customs duties. As tariffs loom, luxury watch brands are racing to get their products into the American market, highlighting the unique desirability of these timepieces among American consumers.

The Impact of Tariffs

In April, former President Trump announced "liberation day" tariffs targeting Swiss-made goods, including luxury watches. While the baseline tariff rate is set at 10%, some Swiss exports could face tariffs as high as 31%. This situation has created a sense of urgency among consumers, prompting many to invest in luxury watches before prices potentially rise.

Andrew Du Plessis, the commercial director for the Luxury Network USA, explains that the resilience of the luxury watch market is a testament to its enduring appeal. "Despite the backdrop of Trump-era tariffs, the demand for luxury timepieces remains strong among affluent American consumers," he notes.

A Shift in Buyer Demographics

The luxury watch market is not only attracting traditional collectors but also a new wave of first-time buyers. Neri Karra Sillaman, an entrepreneurship expert at the University of Oxford’s Said Business School, points out that many individuals are now viewing watches as hard assets. In times of economic uncertainty, people are increasingly inclined to invest in items they believe will retain their value—much like gold.

Watches priced above $3,600 (3,000 francs) have particularly set the tone for this market, with a growth rate of 22.9%. Iconic brands such as Patek Philippe and Audemars Piguet are now seen as viable investment options, further solidifying the perception of luxury watches as a safe haven for wealth.

The Role of Material Composition

The main growth drivers in the luxury watch sector have been watches made from precious metals, steel/gold-steel, and bimetallic materials. These categories have seen significant increases in demand, despite being targeted by Trump’s additional tariffs. Steel watches alone contributed to an 18.9% increase in volume, while precious metal watches saw a 9.5% rise.

However, it’s important to note that without the American market’s boost, total Swiss watch exports would have declined by 6.4%. Major markets like China and Hong Kong have experienced sharp declines of 30.5% and 22.8%, respectively, indicating a broader struggle within the global luxury market.

The Asian Market’s Challenges

The luxury watch market in Asia has faced significant challenges in recent years, with a notable slowdown affecting brands like Rolex, Cartier, and Patek Philippe. This decline has been exacerbated by economic factors and changing consumer preferences. As the Asian market grapples with these issues, the American market’s resilience stands in stark contrast, highlighting a shift in where luxury watch demand is concentrated.

Conclusion

The luxury watch market is currently navigating a complex landscape shaped by tariffs, economic uncertainty, and shifting consumer demographics. As affluent buyers increasingly view timepieces as investments, the resilience of this market is evident. While challenges remain, particularly in traditional markets like Asia, the surge in demand in the United States underscores the enduring allure of luxury watches. As consumers continue to seek tangible assets in uncertain times, the luxury watch industry is poised to remain a significant player in the global market.