Watch Economic Observatory/Rush imports surge ahead of Trump tariffs

The world is paying close attention to the "Trump tariffs." Officially announced in a speech at the White House on April 2, 2025, Trump proposed imposing a uniform 10% tariff on all countries, as well as introducing reciprocal tariffs. While a grace period was set before the tariffs would take effect, the impact of the Trump tariffs is felt not just in the United States but around the world, particularly in China, which has become a "target" of the United States and is accelerating its economic downturn. How will the uncertainty surrounding the future of the United States and China, long the two largest export destinations for Swiss watches, affect the luxury watch market? Leading economic journalist Tomoyuki Isoyama offers an analysis.

Last-minute imports surge ahead of Trump tariffs

　The global economy is at the mercy of US President Donald Trump. On April 2, 2025, he announced that in addition to imposing a uniform 10% tariff on all countries, he would also impose significant "reciprocal tariffs." Initially, reciprocal tariffs of 24% for Japan's exports to the US and 20% for the EU were announced. However, due to the impact on financial markets, such as a sharp decline in US Treasury bonds (and rising interest rates), the reciprocal tariffs were suspended for 90 days for all countries except China.

　The initial reciprocal tariff rate announced for China was 34%, but China's retaliatory measures led to a battle of raising tariffs, with the rate at one point announced as high as 145%. However, in May, the US and China held direct talks and agreed to a mutual reduction of 115%, bringing the tariff on US imports from China to 30%. While this is the result of a Trump-style deal, it has forced major changes in trade between the world and the US.

Last-minute imports increase exports to the US

　The US market for imported luxury watches has seen an increase in "last-minute imports" due to concerns about the imposition of high tariffs. According to the Federation of the Swiss Watch Industry (FH), the value of Swiss watch exports to the US in March was 405.2 million Swiss francs (approximately 703 billion yen), a significant increase of 13.7% compared to the same month last year. With demand for luxury watches in the US remaining strong, this is thought to be due to increased purchases by dealers looking to build up inventory before the tariff hikes.

　This rush to import was not limited to luxury watches, but extended to imports from all over the world. This resulted in a significant distortion of US GDP (gross domestic product) statistics. US GDP for the January-March quarter fell 0.3% on an annualized basis compared to the previous three months, a sharp deterioration from the previous quarter's plus 2.4%. This is the first time in 12 quarters that US GDP has fallen into the negative territory, since the January-March quarter of 2022.

　However, it is difficult to judge whether the US economy is suddenly slowing down. The biggest factor in the fluctuation is the large increase in imports, which rose from a 1.9% decrease in the previous period to a 41.3% increase. Since an increase in imports pushes down GDP, the GDP decline in the January-March 2025 period is caused by increased imports and is not seen as a signal of an economic slowdown.

Personal consumption, which has been driving the US economy, is slowing

　On the other hand, looking at "personal consumption," which accounts for 7% of GDP and has been driving the US economy, it has slowed from a 4.0% increase in the previous period to a 1.8% increase, and there is no doubt that high tariffs are a cause for concern as they will lead to a decline in consumption.

　If the US actually begins to impose high reciprocal tariffs, imports are expected to drop sharply, which could in turn contribute to a positive GDP figure. If this happens, President Trump is likely to tout the fact that "the imposition of reciprocal tariffs has had a positive effect on the US economy." This means that the GDP figures could be swayed by factors far removed from reality.

China market hit hard by Trump tariffs

　Looking at the value of Swiss watch exports, Hong Kong and mainland China are undoubtedly the two countries most affected by Trump's tariffs. Hong Kong and China, once the top export destinations for Swiss watches, have seen a marked decline. Exports to Hong Kong in March were down 11.3% compared to the same month last year, while exports to China fell sharply by 11.5%. Looking at the month of March alone, the United States was by far the largest exporter from Switzerland, followed by Japan in second place, the UK in third, Hong Kong in fourth place, and mainland China in fifth place.

　The economic downturn has already led to a significant drop in personal consumption, and the addition of Trump's tariffs is sure to have a devastating impact on China's domestic export industry. The deterioration in corporate performance is likely to lead to a further slowdown in domestic consumption in China, further dampening demand for luxury goods.

　Cumulative exports of Swiss watches to mainland China for January through March fell 22.5% compared to the same period last year, dropping the country to fourth place. While China is the primary target of Trump's tariffs, and the aim is seen as curbing exports to the US, the rapid decline in demand for luxury watches shows that they are also significantly reducing domestic consumption. In other words, they appear to have succeeded in significantly weakening the Chinese economy itself.