(Bloomberg) — Switzerland’s exporters, from watch makers to pharmaceutical companies, are bracing for the financial fallout from US President Donald Trump’s 39% tariffs, one of the steepest rates globally in his escalating trade war.

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The levies slapped on Switzerland are part of a slew of new tariffs unveiled by Trump late Thursday as the US president forges ahead with his effort to reshape international commerce.

The country exported $60.9 billion worth of goods to the US in 2024, according to the IMD Business School in Lausanne, making it one of the biggest US trading partners. Leading products included pharmaceuticals, watches, medical devices and Nestle SA’s Nespresso coffee.

With a national holiday in Switzerland on Friday, UK-traded Rolex reseller Watches of Switzerland Group Plc became a proxy for Swiss tariff woes, with its shares falling as much as 9.2% in London. Zurich-Listed timepiece makers such as Richemont and Swatch Group AG are also threatened by the move.

Two other pillars of Swiss industry, pharmaceutical companies Novartis AG and Roche Holding AG, have also been hit by an additional tariff shock, even as they were among 17 of the world’s largest drugmakers to receive letters from Trump insisting they immediately lower US pricing.

The tariffs “threaten Switzerland with enormous economic damage,” Interpharma, the association of drug research companies in the country, said. The US move affects research-based pharmaceutical companies in Switzerland, it said, calling on the local industry to “urgently” improve its own framework to “ensure that investments in research and development of innovative medicines are maintained.”

Chocolate, Coffee

Many other large Swiss companies studied the potential impact of the tariffs, with Nestle and chocolate maker Lindt saying they’ll be mostly spared. Although it exports Nespresso to the US, Nestle said it makes more than 90% of the products it sells there locally. Lindt also produces mostly locally.

But for watch makers — the country’s most prized consumer export — the impending tariffs are likely to bring a long-lasting impact, even if they don’t immediately rush to raise prices, said Christy Davis, founder of London-based Subdial, a watch dealer and trading platform.

“Swiss brands are coming to terms with the fact that the landscape has changed,” Davis said.

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The duties would come on top of a slump in global demand, rising metal costs and a strong Swiss franc that have hit timepiece makers hard — the US is the biggest market for Swiss watch exports.

‘Severe Blow’

Switzerland’s luxury watch industry was already struggling before this “severe blow” from Trump, according to Bloomberg Intelligence analysts Deborah Aitken and Andrea Ferdinando Leggieri. Watches of Switzerland will inevitably come under revenue and earnings pressure while Richemont and Swatch will need mid-single-digit price increases, the analysts wrote in a note Friday.

A spokesperson for the company said it will continue to work closely with brand partners to mitigate any potential impact. Swatch declined to comment, while Richemont didn’t immediately respond to a request for comment. Watches of Switzerland shares are down 22% over the past 12 months.

Swiss watch exports had been hit in advance of the latest news, briefly surging in the spring as importers tried to get in ahead of the tariffs when Trump threatened a 31% levy, then easing on hopes of a settlement at a lower rate. Exports dropped by almost 10% in May, led by a slump in shipments to the US.

The tariffs are the latest blow to the watch industry as demand for luxury has been declining with reduced appetite particularly in China, changing consumer trends and uncertainty from Trump’s tariff wars. Sales of expensive timepieces have weakened since the post-pandemic boom ended and prices of used luxury watches surged.

Swiss watch companies also struggled with high metals prices last year and a number of them turned to a government-backed furlough program called short-time work to help see them through. The industry has also been struggling with the strength of the Swiss franc.

If the 39% tariff goes ahead, it could require price increases of more than 20% in the US, according to Jefferies analysts led by James Grzinic. There’s also a possibility that the levies don’t go into effect.

“The one-week hiatus until implementation suggests this could be a negotiating tactic,” he said in a note.

—With assistance from Tim Loh, Jennifer Creery, Angelina Rascouet and Paula Doenecke.

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