Tariffs and the Watchmaking Industry

If, for some reason, your favorite pastime is reading about the impending demise of the luxury watch industry, then you probably haven’t had as much fun as you’ve had in recent months since the days of the Quartz Crisis.

Go online with just about any question involving the mechanics of the horology business and you will be immediately inundated with predictions of inexorable decline. You can spend days watching YouTube videos from all manner of experts, the titles on every one of them heavy with terms like ‘Devastated!’ or ‘Destroyed!’ or ‘Damaged Beyond Repair!’

And what is the reason for all this dystopian gloom? One word: Tariffs.

The Great Tariff Debate

I don’t mean to trivialize the whole discussion around tariffs. Indeed, if 2025 is going to have a buzzword, ‘tariffs’ will likely be it. As a result, we’re going to be dedicating a number of posts to the subject over the next couple of weeks, the aim being to try and make sense of the whole thing and give you the best, most unbiased information about a multifaceted and extremely fluid topic.

In subsequent articles we’ll be concentrating on how tariffs will likely affect both the new and preowned markets, plus what they will mean to U.S. watch manufacturers.

For now though, we are going to go back to the basics; looking at exactly what tariffs are, their history, why they’re charged and, most importantly, who pays them.

What are Tariffs?

The simplest definition of a tariff is that it is a fee, levied by the government on goods imported into the country from abroad. 

There are several reasons a tariff might be implemented. It could be to simply generate revenue. It might be to protect domestic industries by making foreign imports of similar products more expensive. It might be to control and regulate exactly what comes into the country and in what volume. Or, in some cases, tariffs are used as economic or political tools in trade negotiations, i.e. punishing unfair trade, encouraging deals by offering to lower rates, or as a retaliation in disputes.

The History of Tariffs

Despite their recent spotlight, tariffs have actually been around for thousands of years. 

Their first recorded instance dates back to ancient Mesopotamia, around 3,000 BC. City-states would impose duties on goods entering or leaving ports, and the practice existed in ancient Egypt and Greece as well. The Roman Empire charged ‘portoria’, a customs duty, on goods crossing provincial borders. 

In the medieval Europe of the 5^th to 15^th centuries, kings and feudal lords taxed merchants at town gates and bridges, with many cities financed almost exclusively through these tariffs and tolls.  

.The earliest example of a tariff being imposed in the U.S. was The Tariff Act of 1789, which was also one of the first laws ever passed by Congress, and the country relied on tariffs for most federal funding until the early 20^th century—mainly to protect American manufacturing from British goods after independence. 

However, they were not without their downsides. The 1930 Smoot-Hawley Tariff Act, for instance, raised tariffs dramatically in the U.S. and exacerbated the Great Depression by provoking reprisals from other countries. 

Following WWII, tariffs were seen as harmful to global trade and, in 1947, America and 22 other nations formed GATT, the General Agreement on Tariffs and Trade in order to gradually reduce international duties. GATT would be renamed in 1995 as the WTO or World Trade Organization.

Today, while many countries have signed free trade agreements (FTAs) to reduce or eliminate tariffs between partners, they are still part of international trade and diplomacy. 

Who Pays Tariffs?

Much of the confusion and controversy regarding the most recent spate of tariff implementation revolves around exactly where in the chain the fee gets paid.

In the vast majority of cases, any tariff is paid by the importer; the person or company bringing in a product from overseas. 

The cost of the tariff is usually calculated as a percentage of the value of the product (so, for example, if the imported good is valued at $1,000 and the tariff on it is 10%, a fee of $100 would be applied).

What does that mean in practice? Let’s take preowned watches as an example:

Contrary to some sources, buying a preowned watch for personal use from overseas, either physically or from an online platform, will still land you with the new tariff—just a potentially slightly lower one than if you are a professional dealer.

For example, say you bought a watch on a trip abroad (48-hours or longer). You are allowed to bring goods, including watches, into the country up to the value of $800 without paying any duty. If you’re travelling with family, you can pool your exemptions; so a couple can bring back $1,600 worth. Anything over and above that gets charged at the full tariff rate.

As for online purchases, the old de minimis exemption is now gone; or will be from the 29th August. This was the law which allowed low value online goods (again, under $800) to pass through customs without fees. So internet buys are now charged the full tariffs too.

On top of that, you may still owe state sales tax upon delivery or brokerage fees for customs processing if using a courier service like DHL or FedEx. 

Tariffs become an even bigger factor when talking about commercial operations. If a professional dealer is importing preowned watches from abroad to resell they will be charged import tariffs, and it is the dealer, NOT the overseas seller who has to pay them. 

For Swiss brands, that is the full 39%. For non-Swiss, the rate is 15%—still painful but not as bad.

Naturally, if that dealer is intent on staying in business, the additional cost will be baked into the price they then sell the watch on for; the obvious upshot being a higher price tag for you as the ultimate consumer. Of course, there are some dealers who are so large volume they can afford to absorb some of that cost themselves, but for the most part, it is passed on.

That, in very broad strokes, is what applies to preowned models. New watches are different, and the latest round of tariffs proposed by the present government could make purchasing a brand new timepiece in America very expensive indeed.

We’ll cover that in our next article.