Tariff imposed and Watch Prices in the USA

[Tools]

Originally Posted by Beto737

So…….skip Rolex and go Shinola?

It could have been Waltham, Benrus, Longines, etc... but they didn't survive the cheap imports.

You could still support US watchmakers making a comeback.

https://watchranker.com/american-watch-brands-usa/

[77T]

Originally Posted by cy888

The tariff will have to be paid by the importer, in case of Rolex, would be Rolex Watch U.S.A., Inc., It's up to them to pass the costs to the AD's.

One extra point, RUSA sets MSRP.
If RUSA wants the tariff costs covered in the distribution channel, then the MSRP will be raised by RUSA. To what extent we don't know. It is possible that some retailers will keep their MSRP the same and invoke an "import surcharge" a'la the airline model for fuel surcharge.

Some may recall administrative law and regulatory rulings control how wristwatches and bracelets might be considered separately from movements/cases when policy decisions are made.

While the tariffs are an Executive Order, the application is managed by CBP. Want to know how twisted it can get?

Consider this case ruling for Seiko...
https://rulings.cbp.gov/ruling/H306338


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[KenRose]

Originally Posted by SS Oyster

You think CNN is unbiased?!? Or are experts?!?


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Would you like me to give you the same quote from the Wall Street Journal?

[KenRose]

Originally Posted by S’portEye

Nothing compared to what people had to do the last 4 years. Relax Francis, it’s all a bargaining chip.

It's more than that Francis. It destroys trust between allies, both strategic and economic. What good is an agreement if one party is willing to break it for a made up reason. There was real economic damage yesterday that will take a long time to repair. Look at China devaluing their currency in 2018. Or the US defaulting on the dept ceiling during Obama.

This is from a guy who didn't like Biden so don't bring up "the last four years" nonsense.

[askdanny]

Originally Posted by Michigan_State

How do you mean? Taxes in general have the potential to distort the quote-unquote perfect market price. This is not exclusive to Europe. Other than that, VAT varies from country to country.

Why spell out "quote-unquote" question mark

[HiBoost]

Originally Posted by Tools

Rolex watches were already subject to a tariff, they were not coming into the country for free. Even if you bought one out of country, when you bring it in you have to pay Duty/tariff fees.

31%, if it actually sticks, is just a few percentage points above where they were already at, so to be competitive a company can reduce their "profit" by a couple of percent, as well as the retailer, and costs remain the same to the end user.

To think that tariffs are new is fear mongering, everybody everywhere pays a fee/duty/tax on goodss they import into a country.

All that has been said is that Switzerland charges an average of 61% tariff for US imports into Switzerland, so the US will impose 31% on Swiss imports unless there can be a reciprocal trade agreement made that is more balanced..

The Grey Market will not be more attractive, they would pay any tariff as well. If anything, rising prices will make the AD more attractive with increased inventory and prices lower than the Grey Market currently sells for.

Everything I have read says that Switzerland abolished industrial tariffs on imports years ago and that they only thing they have a tariff on is agricultural products. And that is supposedly closer to 30%. But the overall average across all imports is claimed closer to 1.7%. The revealed methodology behind our tariffs yesterday is that we are factoring in trade deficits and scaling according to that. But I need somebody to explain to me how a country of 9 million people are supposed to buy as much stuff from us as our country of 340 million buys from them.

And as far as the 31% only being a few percent off current duties, do you have a reference for this? Current duties on watches break down according to case metals, movement jewels and various other arcane calculations. Last year when I brought $10k in new Swiss watches back into the US my total duties were $156, i.e. 1.56%.

ref: https://www.trade.gov/country-commer...import-tariffs

[seezur]

I don't think prices will increase for the consumer by much if at all.

I think there's a lot of assumptions about your average Rolex buyer, i.e. that they are obscenely rich and unaffected by price increases.

I know multiple people who own a Rolex who have decidedly middle class jobs (to be fair I suppose they could all be crypto millionaires or lotto winners). I met a cop with a DJ once, a few CFPs, a guy who was an apprentice electrician. Hell, the sales manager I've been working with at the AD has a DD. This is an income range of let's say 60-150k/yr gross where I live.

My point is, I don't think Rolex's primary marketshare is the ultra, ultra wealthy. I think most of their catalogue are SS sports watches and DJ for aspirational middle class buyers celebrating an achievement. I think the hype years and the covid era had a lot of people financing these watches and generally being financially irresponsible. These types of people are not going to be able to or want to pay 31% more. Sure, the ultra wealthy or the irresponsible still might.

Swiss watch sales have already been slowing down quite drastically, and a price increase will speed that up. The fact that Rolex was so unprepared for the surge in demand and subsequently is so far behind in terms of fulfilling orders is the only reason there are still waiting lists.

Outside of Rolex I think the tariffs will crush Omega, JLC, Cartier etc. especially considering the insane YOY price increases these brands have already seen for the past 5 years. JLC especially. I have been waiting forever for my AD to get a DD (only God knows why). I have been very fortunate financiall, and I can promise you that I won't pay 31% more for it. If price increases come to pass I'll just stop collecting for a bit and be happy with what I have.

It's very possible that the Swiss (and others) will capitulate. So all this worry might be for nothing. I think it stands to hurt all parties involved if it goes through, but I think it'll hurt the watch industry much more.

[KenRose]

honestly given the worldwide demand for Rolex's vs what is produced I am guessing that Europe and China will make up the share of US bound watches. Any watches going into the US will be an retail issue.

[S’portEye]

Originally Posted by KenRose

It's more than that Francis. It destroys trust between allies, both strategic and economic. What good is an agreement if one party is willing to break it for a made up reason. There was real economic damage yesterday that will take a long time to repair. Look at China devaluing their currency in 2018. Or the US defaulting on the dept ceiling during Obama.

This is from a guy who didn't like Biden so don't bring up "the last four years" nonsense.

Well, it’s happening. Guess we’ll see what shakes out. The sky is not falling. “Trust between allies” lol…

[seezur]

Originally Posted by KenRose

honestly given the worldwide demand for Rolex's vs what is produced I am guessing that Europe and China will make up the share of US bound watches. Any watches going into the US will be an retail issue.

Chinese demand for luxury watches including Rolex has cooled off big time due to their own economic turmoil. They might be able to divert some production to Europe, but America is still their biggest market.

So let's say theoretically this goes on for 4 years. If they divert most of their production to Europe (including the increased output from their new factories), I could see them diluting the market. Idk personally about European countries, but I do know things have been getting easier in the bigger metro areas.

I also wonder if watches that are already made have certain market designations that can't be changed after production, locking up whatever they had made before these tariffs?

[Tools]

Originally Posted by HiBoost

. . .
And as far as the 31% only being a few percent off current duties, do you have a reference for this? Current duties on watches break down according to case metals, movement jewels and various other arcane calculations. . . .[/url]

What I meant here is that the Geneva cost to import, in bulk, to Rolex USA is nowhere near the MSRP of a Rolex by the time it gets to a Dealer, it is a small fraction of that price and also not in addition to any already levied tariff.

A 12,000 dollar watch from a Dealer may likely only have had 3,000 dollars that was its tariff declared value to import.

So, thinking that your watch will jump by 31% retail, at the Dealer, is way, way off.

If you import the other direction, you may have a low initial tariff, but importers also pay any VAT in addition.

[golftime]

Originally Posted by Rudiologe

That is untrue, where did you get this from? The amount of tarifs up until today was actually calculated. If you take the EU as an example, it has charged goods imported from the US with 2,5 percent tarifs on average. The US charged goods imported from the EU with 2 percent on average. So yes, there is a slight difference, but that is to be expected with complex matters like this. Both the US and the EU profited greatly from this. At least up until now.

I confess my limited knowledge of what seems like a very confusing topic, however my understanding is that most European countries have a Value Added Tax (VAT) that goes to the residence government and generally runs about 20%. Is this not the same as a tariff?

[ndirish2001]

Originally Posted by watchnoob

LOL - you've been listening to the political soundbites too much from Fox News. Switzerland actually has low tariffs. The 60+% number is based on the trade deficit-not the tariffs. I encourage you to dig deeper into the data/studies, instead of relying on political soundbites from the administration/Fox news.

Amen. There are so many flat out wrong statements in that post that it’s difficult to know where to start.

[ndirish2001]

Originally Posted by golftime

I confess my limited knowledge of what seems like a very confusing topic, however my understanding is that most European countries have a Value Added Tax (VAT) that goes to the residence government and generally runs about 20%. Is this not the same as a tariff?

No. VAT is the equivalent of a sales tax, in that it doesn’t matter where the product was made.

[askdanny]

Originally Posted by S’portEye

Well, it’s happening. Guess we’ll see what shakes out. The sky is not falling. “Trust between allies” lol…

Are we sure it's happening though?

They take effect on April 9, which, in this administration, is about 20 news cycles away. Trump has a history of delaying, reducing, or canceling plans — including tariffs.

—Danny

[ndirish2001]

Originally Posted by KenRose

It's more than that Francis. It destroys trust between allies, both strategic and economic. What good is an agreement if one party is willing to break it for a made up reason. There was real economic damage yesterday that will take a long time to repair. Look at China devaluing their currency in 2018. Or the US defaulting on the dept ceiling during Obama.

This is from a guy who didn't like Biden so don't bring up "the last four years" nonsense.

One nitpick: the US has never defaulted on its debt. Our debt got downgraded in Obama’s presidency because Congress played chicken with the president on raising the debt ceiling.

[ndirish2001]

Originally Posted by KenRose

This is absolutely not true. They are not "reciprocal" tariffs. That was just what Trump was calling them. Instead they are tariffs based on a misguided calculation related to trade deficit. This is not a political discussion and many in business are having trouble answering how buying goods overseas for the cheap labor is hurting their business.

Your comment regarding Canada and tariffs is also completely wrong. There were no tariffs between the countries from NAFTA to the newer USMCA. The only tariffs that Canada added were after Trump's 25% last month. They still remain in place.

[Old Expat Beast]

This seems to be a sensible assessment of the situation from Marc and Long Island Watch.

https://youtu.be/IVwIyciIIiI?si=aSablYVhLr64-EyN

[golftime]

Originally Posted by watchnoob

That is applied to all goods regardless of country of origination, including goods produced in their own country. How is this the same? It's akin to saying that the sales tax we impose is a tariff on imported goods.

I am genuinely confused how so many people in here are misinformed and regurgitating soundbites from the administration or Fox News. I guess the demographics for Rolex aficionados are not as intelligent as I had thought.

To imply I obtained this information from Fox News or the Administration is not only incorrect but implies a political agenda which is not correct. I admitted my lack of knowledge regarding the VAT and posed it as a question rather than a statement for that very reason. Very uncool.

[watchfreak207]

Now I know why Econ 101 was a requisite course during my uni days ��

[watchnoob]

Originally Posted by ndirish2001

One nitpick: the US has never defaulted on its debt. Our debt got downgraded in Obama’s presidency because Congress played chicken with the president on raising the debt ceiling.

The claim that the U.S. has never defaulted on its debt isn’t entirely true. While it’s correct that the U.S. has never outright refused to pay back its debts (called repudiation), there have been a few times in history where it technically defaulted. During the War of 1812, the Treasury couldn’t make payments on its funded debt. Then under FDR, the government broke its promise to repay bondholders in gold and instead paid them in paper currency (worth less then)—a clear breach of contract. True that Congress played chicken with raising the debt ceiling and SP downgraded the credit rating from AAA to AA+ because of all the drama. But, the downgrade didn’t actually cause borrowing rates on Treasury bills to go up like you’d expect. `

[watchnoob]

Originally Posted by S’portEye

Well, it’s happening. Guess we’ll see what shakes out. The sky is not falling. “Trust between allies” lol…

I sincerely hope that it "shakes out" for the best, but early signs from the market and consumer sentiment, which in itself has general equilibrium effect on consumption, is not looking good. Consumption already has been propped by folks like us (the top percentile) and has massively decreased for most (p90) of the population based Feb data. There's a "wealth effect" on consumption for the top percentile and I worry that the drop in equity markets would really lead to a substantial drop in consumption. From there it will just spiral down.

[Bro Watch]

I heard a man say "if you are buying a luxury item and you took that money spent on that item and burned it, would it affect your life? If burning that money would affect your life, you should not be spending that kind of money". If adding extra money from the tariffs to a luxury watch would affect you. You probably should not be buying that watch.

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[philhendrix]

Originally Posted by askdanny

It's not reciprocal when the formula is based on trade deficit, not actual tariffs.

I wonder what Switzerland is supposed to do when 99% of U.S. goods already enter Switzerland duty-free. Now they're being charged 31% in tariffs. I guess stop making products that Americans want to buy?

—Danny

well said.

hoping this is just a blip and we can return to normal at some point.

[cyind]

Originally Posted by Beto737

So…….skip Rolex and go Shinola?

LOL! Very Funny!

[omar-rye]

Originally Posted by watchnoob

I sincerely hope that it "shakes out" for the best, but early signs from the market and consumer sentiment, which in itself has general equilibrium effect on consumption, is not looking good. Consumption already has been propped by folks like us (the top percentile) and has massively decreased for most (p90) of the population based Feb data. There's a "wealth effect" on consumption for the top percentile and I worry that the drop in equity markets would really lead to a substantial drop in consumption. From there it will just spiral down.

Why thank you

[Andad]

Originally Posted by watchnoob

I sincerely hope that it "shakes out" for the best, but early signs from the market and consumer sentiment, which in itself has general equilibrium effect on consumption, is not looking good. Consumption already has been propped by folks like us (the top percentile) and has massively decreased for most (p90) of the population based Feb data. There's a "wealth effect" on consumption for the top percentile and I worry that the drop in equity markets would really lead to a substantial drop in consumption. From there it will just spiral down.

If you think that 300k forum visitors are the top percentile you have missed the horological bus.

[Fleetlord]

Originally Posted by Tools

What I meant here is that the Geneva cost to import, in bulk, to Rolex USA is nowhere near the MSRP of a Rolex by the time it gets to a Dealer, it is a small fraction of that price and also not in addition to any already levied tariff.

A 12,000 dollar watch from a Dealer may likely only have had 3,000 dollars that was its tariff declared value to import.

So, thinking that your watch will jump by 31% retail, at the Dealer, is way, way off.

If you import the other direction, you may have a low initial tariff, but importers also pay any VAT in addition.

Yeah, this is pretty much a non factor in terms of retail pricing. May see a few % increase, but maybe not as a number of brands have already greedily increased prices over the last few years to take advantage of the “hot” watch market during COVID or move their brand “ upmarket “ by charging more. They already have a huge margin pad built in that can absorb some, if not all, of the actual tariff.

[aceofangel]

Originally Posted by S’portEye

Nothing compared to what people had to do the last 4 years. Relax Francis, it’s all a bargaining chip.

If it’s just a bargaining chip for negotiations it would be smarter to target individual or groups of countries to pick them off one by one…

[TikTok]

So, how come this thread survived when many others didn’t?