Donald Trump was inaugurated as the 47th President of the United States in January 2025. His second term as president is already generating controversy. The Trump Tariffs, which increased tariffs on all goods from Mexico and Canada by 25%, have raised concerns about their potential impact on the global economy. How will the Trump administration, including its tariff measures, affect the luxury watch market? Leading economic journalist Tomoyuki Isoyama offers his analysis.
Economic journalist and professor at Chiba University of Commerce. Born in Tokyo in 1962. Graduated from the School of Political Science and Economics at Waseda University. Served at the Nikkei Inc. as a securities reporter, deputy chief of the same department, Zurich bureau chief, Frankfurt bureau chief, and deputy editor-in-chief and editorial committee member for Nikkei Business. Left the company in 2011 to go independent. Covers a wide range of political, government, and business figures. His books include "The International Accounting Standards War: Final Chapter" and "The Secrets of Switzerland, the Brand Kingdom" (both published by Nikkei BP).
[Tomoyuki Isoyama Official Website]http://www.isoyamatomoyuki.com/
Text by Tomoyuki Isoyama
Mikio Ando: Illustrations
Illustration by Mikio Ando
[Article published in the July 2025 issue of Kronos Japan]
Trump tariffs increase uncertainty over global consumption
It has been just over two months since President Donald Trump took office in the United States. The world has been at the mercy of his successive policies, but the one that has the greatest impact on the economy is the issue of tariffs. On March 4, 2025, he imposed a 25% tariff on all products from Mexico and Canada, citing the influx of illegal immigrants and drugs, and on March 12, he also imposed a 25% tariff on imported steel and aluminum products.
The view that these tariff hikes will slow down not only the US but the global economy is spreading, causing great confusion in the markets, with stock markets in the US, Europe, and Japan falling sharply. Markets are fluctuating between joy and sorrow depending on President Trump's policies and statements.
He emphasizes the positive side of raising tariffs: that it will increase revenue for the U.S. government, reduce the worsening budget deficit, and allow tax cuts to continue.
Will President Trump's policies work?
President Trump has positioned reducing the US government's budget deficit as one symbol of achieving his "MAGA" (Make America Great Again) slogan, which he advocated throughout his election campaign. The US budget deficit for fiscal year 2024 (October 2023 to September 2024) is expected to reach $1.833 trillion (approximately ¥271 trillion), the largest deficit since the COVID-19 pandemic. Interest payments on the debt alone will exceed $1 trillion (approximately ¥150 trillion). Considering that payments were around $400 billion until 10 years ago, this represents a huge financial burden.
He has also set up the Department of Government Efficiency (DOGE) headed by Elon Musk, and is rapidly working to streamline the government sector. While there has been widespread opposition to his reckless tactics, such as mass layoffs of federal employees and the dismantling of the U.S. Agency for International Development (USAID), President Trump appears unconcerned, arguing that increasing tariff revenues and cutting government spending will be beneficial to the United States in the short term.
However, many experts warn that raising U.S. tariffs would only have a negative impact on the American people in the medium to long term, as it would lead to higher prices for imported goods and reignite serious inflation. They also warn that it would reduce exports to the U.S. and drag down economies around the world.
Will President Trump's policies boost the US economy or stall it? How will their impact affect the global economy? No one can give an accurate answer at this stage. However, there is no doubt that uncertainty about the future is clearly increasing.
The future of the watch market is uncertain
In this environment, the outlook for the luxury goods market, including watches, is uncertain. The Federation of the Swiss Watch Industry (FH) announced that global exports of Swiss watches in February 2025 fell by 8.2% compared to the same month last year. This was largely due to a 6.7% drop in exports to the United States, which is now the world's overwhelmingly largest consumer of Swiss watches. Of the top 30 export destinations, 21 saw a decline, with only nine seeing an increase.
While this could be seen as a backlash against the 4.1% year-on-year increase seen worldwide in January, the cumulative total for January and February was down 2.4%. Looking only at exports to the US, the cumulative increase for January and February was 4.2%, so it is not as if consumption within the US is experiencing a downturn. The main reason remains the ongoing decline in exports to Hong Kong and China.
President Trump has also begun to take note of the size of Japan's trade surplus with the United States. Japan was included in the tariff hikes on steel and aluminum products, and a major focus going forward will be the impact of automobile tariffs on Japanese cars. With domestic prices continuing to rise, if Japanese companies' profits hit a plateau, wage increases will likely stagnate, putting a brake on domestic consumption.
Swiss watch exports to Japan for January and February increased 0.9% year-on-year, maintaining positive growth, but the growth rate is low considering the robust inbound demand. This may be because many dealers are unsure about the future outlook for consumption and are cautious about building up inventory. For the time being, a wait-and-see approach will likely be maintained until the outlook for the US and global economies and consumption is ascertained.
