Swiss luxury watch stocks fell sharply on Monday after the U.S. imposed a 39% import tariff, raising fears of a sharp sales decline in their biggest market.

Richemont and Swatch shares dropped by as much as 3.4% and 5%, respectively, as markets reacted to the new tariffs after being closed Friday for Swiss National Day.

“The impact of the U.S. tariffs, if they stay at 39%, could be devastating for numerous brands in Switzerland,” said Jean-Philippe Bertschy, analyst at Vontobel. “We expect a strong negative impact for watches in the entry to mid-price segments.”

In 2024, Switzerland exported watches worth 26 billion Swiss francs ($32.79 billion), down from a peak of 26.7 billion francs ($33.64 billion) in 2022, and similar to 2020 levels when the industry faced disruptions due to the pandemic.

The U.S. remains the top foreign market for Swiss watches, accounting for 16.8% of exports, which translates to about 4.4 billion francs ($5.45 billion), according to the Federation of the Swiss Watch Industry.

Shahzaib Khan, a Swiss watch exporter, said many brands may not be able to absorb the tariff hike.

“I suspect, there won’t be any goods being shipped to the U.S. until the situation clears,” he said.

Analysts at Jefferies noted that Richemont derived just under 10% of its 2024 revenue from the U.S., though watches represented nearly a third of its overall sales. 

Swatch, had already raised prices by 5% in response to earlier tariffs announced in April. The company generated 18% of its watch sales from the U.S. market last year, according to its CEO. 

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