Tariffs and the Preowned Watch Industry

Unless you’ve been living in an internet-less backwoods bolthole for the last few months, you will be well aware of the new round of tariffs being foisted on imports into the U.S. from several countries around the world, and none more so than Switzerland.

The European enclave is still in a state of shock after the U.S. government announced there would be a 39% fee added on all Swiss luxury imports into the States, starting from 7^th August. This was on top of the 10% already implemented in April, which somewhat dampened the party at Watches & Wonders Geneva. (In a particularly calculated move, the latest tariff was announced on August 1^st, Switzerland’s National Day).

The move comes in response to the government’s perception of a huge trade deficit with the Swiss. Proving that finance doesn’t need to be complicated, that shortfall is cited as $39b, apparently accounting for the 39% tariff!

It’s all very messy and has already induced a certain amount of panic. But the question we’re most interested in is: what will it mean for the preowned watch industry?

The Bad News

We explored some of the basics around tariffs in earlier articles, the most important upshot being that it is the importer, not the exporter, who has to shoulder the tax. That means dealers and individuals bringing Swiss watches—new AND preowned—into the country will have to pay 39% more for the privilege of doing so.

That is something of a drag all round. Those importing pieces for personal use are going to find they’re suddenly much more expensive and professional dealers will also be forced to raise prices. 

And it doesn’t matter where the watches are bought from. Whether you import your preowned model from the U.K., Japan, Australia or anywhere else in the world, if it was made in Switzerland, the tariffs apply. 

Industry sources are suggesting that Authorized Dealers in the States will likely pass on somewhere around 75% of the tariff cost on new watches to consumers, with the remaining 25% absorbed through a reduction in profit margin and the always ominous ‘operational efficiencies’, a nicer way of saying a bunch of people are about to lose their jobs. But even with that reduced rate, an increase in price of around 30% is not unlikely. 

In terms of timing, it couldn’t really be any worse for the Swiss houses. The most popular models are already subject to some fearsome waiting lists, and this latest increase, coming just a few months after April’s rise, is liable to price out a large proportion of potential buyers in the industry’s most important sector, the mid-tier market. 

The Good News

Remember, back in 1988, when the second generation Rolex Daytona came out? Zenith’s reworked El Primero automatic movement made the once-underperforming chronograph the absolute must-have for every watch fan out there.

The enormous demand could not be met and so, folks hungry for a Daytona and unwilling to sit on a waiting list, started snapping up the original iteration as preowned buys instead. And an entire industry was born. 

Today, brands have raced to import as many new watches as possible before the tariffs take effect. But with only a few months-worth of stock on hand in the U.S., more and more people are again turning to the preowned lists to get their hands on their dream piece before the stock shortage makes its presence felt and prices go up in the secondary market as well.

Dealers are already seeing massive increases in interest and analysis of the preowned watch market done by EveryWatch, a European firm which monitors and collects data on all aspects of the horology industry, reports a 30% growth in both value and volume during the first half of the year. 

In fact, insiders are cautiously predicting the preowned market might overtake the primary in the near future, with certified preowned programs such as Rolex CPO set to expand rapidly. 

What does all of that mean to those of us with a collection? Well, that watch box of yours just became a whole lot more valuable overnight. Once the surplus of new models warehoused in the States before the tariffs set in is exhausted, chances are demand for preowned versions is going to rise. Simple economics tells us that will lead to an increase in the price people are willing to pay should you be in a selling mood.

What Other Effects Might Take Place?

Experts in this sort of thing say they are envisaging a number of knock-on effects of the huge tariff implementation—the most major being nothing short of a complete shift in the way Americans buy luxury watches.

The enhanced status of the secondary market could be a permanent one. Those previously wary of venturing into preowned territory could, with no other viable option, discover its advantages. That will lead to a maturation of the industry and will also bring in an exponential number of new preowned dealer platforms, increasing competition and controlling pricing.

It is also very likely that American customers will focus on non-Swiss brands in order to sidestep the import fees. Japan, Germany and the U.K. have similarly been slapped with tariffs but at a lower level than the Swiss (approx. 24%, 15% and 10% respectively). So it wouldn’t be a surprise to see more Grand Seiko, Lange and Bremont doing the rounds in the future.

And one other intriguing possible side-effect, posited by several experts, is that it could all lead to an increase in watches being smuggled into the U.S. Should, for instance, your job necessitate a business trip to a country with low or even no import duties; Hong Kong, Singapore, New Zealand, Qatar, UAE, etc., buyers could have their watches sent to their offices there and wear it on their return home. (Not saying you should, just saying it might happen!)

In our next article, we’ll look at what the tariffs might do to help, or otherwise, the American watchmaking industry.