Chocolate, skincare and timepieces: What 39% tariffs on Swiss goods mean for U.S. consumers

U.S. buyers of Swiss products, from luxury watches and skincare to artisan chocolates, could soon look crisp terms rises if negotiators are incapable to onslaught a woody to avert 39% tariffs owed to travel into effect connected Thursday.

The announcement past week that Switzerland faces 1 of the highest U.S. tariff rates successful the world stunned galore politicians, analysts and businesses, who had thought the state was adjacent to negotiating a woody akin to those of the European Union and U.K., which got baseline rates of 15% and 10% respectively.

The U.S. has a hefty commercialized shortage with Switzerland, totaling $38.3 cardinal successful 2024. The Swiss authorities points retired that the spread is successful portion due to the fact that of the latter's presumption arsenic the world's biggest halfway of golden refining, with huge quantities of the precious metallic passing done the state for processing earlier it is sent astir the world. Both golden and metallic were exempted from the White House's "reciprocal tariff" argumentation launched successful April.

The U.S. is besides a large importer of Swiss pharmaceuticals, an manufacture that has been mired successful disorder implicit the tariff rates it volition face, and aesculapian devices. Pharma products are presently exempt from the 39% levies, though sector-specific tariffs whitethorn yet travel nether the U.S.'s abstracted Section 232 investigation.

But consumers volition mostly beryllium acquainted with the Alpine country's high-end products, from Rolex watches to premium skincare and quality products. Sales could beryllium rocked if the 39% tariffs stay successful spot for an extended play — thing Swiss negotiators are presently scrambling to avoid, arsenic economists warn of a monolithic deed to growth, jobs and stocks.

The U.S. was the biggest overseas marketplace for Swiss watches successful 2024, with exports totaling 4.37 cardinal Swiss francs ($5.4 billion), according to the Federation of the Swiss Watch Industry.

To suffice arsenic Swiss-made, astatine slightest 60% of a watch's accumulation outgo indispensable beryllium Swiss-based, portion its method improvement indispensable beryllium conducted successful the country.

"Swiss watches person agelong been a cornerstone of the U.S. market, and a 39% tariff would beryllium a existent shake-up," Paul Altieri, laminitis and CEO of online resale level Bob's Watches, told CNBC.

"Suddenly, each import would transportation a hefty other cost, and dealers would look pugnacious choices — sorb the tariff, devour into margins, oregon walk it connected to customers. You'd apt spot longer pb times arsenic brands and retailers realign logistics, and higher sticker prices crossed the board." The retail terms of a Rolex Submariner could leap from $10,000 to astir $14,000, helium noted.

For Swiss ticker businesses, a 39% tariff would beryllium "devastating," Jean-Philippe Bertschy, caput of Swiss equity probe astatine Vontobel, told CNBC's "Squawk Box Europe" connected Tuesday.

"They accrued the prices already successful outpouring by an mean of 5 to 10%, I deliberation different deed volition beryllium rather hard for the U.S. user for sure, particularly for the introduction into the mid-segment level." In a probe note, Vontobel flagged Swatch arsenic susceptible to a tariff hit, with shares falling 2.3% connected Monday.

"For the luxury watches, for the brands similar Rolex, Patek Philippe and Audemars Piguet, you person immoderate agelong waiting lists. So I deliberation it's going to beryllium much comfy for these companies to summation the prices," Bertschy continued.

"You person precise constricted measures to take. You can, of course, summation efficiencies and to effort to bash immoderate different measures to antagonistic U.S. tariffs, but overall, precise challenging for the industry."

Consumer goods elephantine Nestlé is 1 of Switzerland's biggest firms. The institution says that it faces a minimal nonstop interaction from tariffs due to the fact that it produces much than 90% of what it sells successful the U.S. locally.

That's mostly the lawsuit for user staples specified arsenic instant java oregon bottled h2o which are high-volume, low-ticket items, James Edwardes Jones, managing manager of user probe astatine RBC Capital Markets, told CNBC's "Squawk Box Europe."

Its fashionable Nespresso java brand, known for at-home java machines and capsule pods, could, however, beryllium among those goods exposed to higher rates and truthful terms hikes.

"In Nestle's lawsuit specifically, Nespresso is each manufactured successful Switzerland and past exported astir the world, truthful it seems apt that volition beryllium caught successful a tiny way," Edwardes Jones added.

Nestle did not instantly respond to CNBC's petition for remark connected the interaction of Swiss levies. The institution does not specify the level of its U.S. income for Nespresso, but its half-year results showed North America grew astatine a "strong double-digit rate."

Switzerland's world-renowned quality and skincare products could besides beryllium taxable to terms hikes arsenic brands not included successful a pharmaceutical tariff exemption look to offset higher import costs.

That could beryllium astir notable for companies that pridefulness themselves connected Swiss production, specified arsenic caviar-based anti-aging skincare marque La Prairie, spa supplier Valmont and nail attraction concern Mavala, nary of which responded to CNBC's petition for comment.

"While Swiss firms tin mostly upwind a 10-15% tariff without large borderline erosion oregon request loss, 39% sets the barroom overmuch higher," Lombard Odier said successful a Monday note.

Lausanne-headquartered Galderma, whose products see injectable aesthetics and Cetaphil facewash, meanwhile, said that it does not nutrient successful Switzerland and is presently mostly excluded from planetary tariffs nether pharma exemptions.

However, its ample accumulation capableness successful the European Union, U.K. and Canada could beryllium taxable to higher levies, perchance hitting user costs.

Higher import duties are besides seen pushing up the terms of luxury goods, including Richemont-owned high-end jewelry brands Cartier and Van Cleef & Arpels.

BofA Securities said successful a enactment Tuesday that 7% of Richemont's input costs would beryllium exposed to higher Swiss tariffs, apt adding to higher user prices. "Price increases would be the astir evident mode to mitigate the headwind," the analysts wrote.

Richemont did not respond to CNBC's petition for remark connected the 39% rate, nevertheless it flagged successful its first-quarter net that tariffs could pb to "increased prices," which could interaction user demand.

Lombard Odier noted that a "small fraction" of luxury exports could spot request for their products summation with price, but broadly terms hikes were acceptable to wounded user demand.

Roger Wehrli, manager of Swiss chocolatiers' manufacturing relation Chocosuisse, said a 39% tariff complaint would beryllium passed connected via prices and origin a steep nonaccomplishment of U.S. concern for galore of the group's members. The caller appreciation of the Swiss franc against the U.S. dollar, which causes imports to go much expensive, means the effectual terms summation would beryllium person to 55%, helium noted.

The main interaction volition beryllium connected small- and medium-sized businesses that are incapable to utilize U.S. accumulation sites similar large multinationals can, Wehrli said. Industry juggernauts Lindt & Sprüngli and Barry Callebaut already person factories stateside, portion smaller Chocosuisse members specified arsenic Camille Bloch and Läderach nutrient exclusively successful Switzerland.

"There's different circumstantial occupation with producing successful the United States," Wehrli continued.

"If you privation to statement your cocoa arsenic Swiss past it has to beryllium produced successful Switzerland. That's a prime motion successful the planetary market, truthful you volition much oregon little suffer your customers if it's not Swiss root anymore," Wehrli told CNBC.

These rules of root forced Toblerone, owned by U.S. radical Mondelez International, to alteration its packaging successful 2023 to notation to itself arsenic being "established successful Switzerland" alternatively than "Swiss chocolate" aft it moved immoderate of its accumulation from the Swiss superior Bern to Slovakia. CNBC has contacted Mondelez for remark connected the interaction of tariffs connected Toblerone successful the U.S.