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TRUMPONOMICS and swiss watches

May 2017


TRUMPONOMICS and swiss watches

If past is prologue, Donald Trump will be good for Swiss watch sales in the United

T

here will be plenty of historical firsts when Donald J. Trump takes the oath of office and becomes the 45th president of the United States on January 20. The scariest is that he is the first person in U.S. history to become president without having served either in the military or in any government post. Wish us luck with that.

Then there’s this amazing double first: Trump is the first President to launch his own watch line. And Melania Trump is the first First Lady to do the same thing. His came in 2005 in a venture with Macy’s, the giant department store chain. Hers came in 2010 in a tie-up with QVC, the giant TV home-shopping network.

Swiss watch industry executives anxious to assess the impact of the Trump presidency on the Swiss watch business in the U.S. might see the First Couple’s watch launches as a good omen. It isn’t.

“Enough of this bullshit, let’s get on with the autographs!”

The Donald J. Trump Signature Watch Collection, launched in 2005, consisted of Far-East-produced quartz watches priced from $85 to $250 with styles imitating best-selling Swiss models, like the “Monaco-styled” chronograph. The future president was not a particular fan of them. At an appearance at a Macy’s at a mall in Orange County, California in 2005 to promote his various products, he boasted to the crowd that the Piaget watch he was wearing cost $100,000 more than the watches that bore his name. Then, according to the Orange County Register, he declared, “Enough of this bullshit, let’s get on with the autographs!” Clearly a president in the making. His watch venture lasted one year.

Melania Trump’s “Melania Timepieces and Jewelry Collection” befitted the wife of a man who fancies himself “a blue-collar billionaire.” According to the New York Times, one of the watches was “a chunky silver watch styled like a bracelet (‘with holes so you can see the skin,’ Melania noted) for $64.” No, the best clue to how Swiss watches might fare in the U.S. during the Trump administration, I believe, lies in Swiss watch export data. I have covered the U.S. watch market for 39 years spanning 10 presidential elections. A review of Federation of the Swiss Watch Industry export data to the U.S. over that period shows conclusively that in American presidential elections, the candidate’s political party is destiny, particularly in terms of economic policies. When a Republican president takes over from a Democrat, as just happened, Swiss exports to the U.S. get a big boost followed by a big bust.

Let’s look at the record:

REAGAN/BUSH 1 Republicans Ronald Reagan and George H.W. Bush controlled the White House for three consecutive terms. Reagan’s economic policies, known as Reaganomics, emphasised tax cuts, decreased social spending, increased military spending and deregulation of domestic markets. Reaganomics stimulated the economy but created enormous deficits. From 1980 to 1990, Swiss watch exports to the U.S. increased by 113% to CHF 903.9 million and the U.S. surpassed Hong Kong as the world’s top market for Swiss watches. But in 1991, the boom went bust. Between 1990 and 1992, exports fell 10.8% and the U.S. dropped to a humiliating #3 in the Swiss watch ranking after Italy. In the election of 1992, Bill Clinton’s campaign manager James Carville gained immortality by making the slogan “It’s the economy, stupid!” the theme of the campaign. Clinton won.

CLINTON When the Democrat replaced the Republican in the White House, there was no boom/bust cycle. Swiss watch exports to the U.S. increased every year of Clinton’s two terms, 1993–2000, an increase of 129% to CHF 1.84 billion. The U.S. became Switzerland’s top watch market again in 1998.

BUSH 2 In 2001, Republican George W. Bush succeeded Clinton and the boom-bust cycle resumed. Between 2002 and 2007, Swiss watch exports to the U.S. soared 54% to a record CHF 2.44 billion. The bust came in 2007 with the sub-prime loan crisis, which triggered the Great Recession in 2008. Between 2007 and 2009, Swiss watch exports to the U.S. fell by an astounding CHF 970 million to CHF 1.47 billion, sending sales back to the level of 1998! Once again the U.S. fell behind Hong Kong in the export rankings.

OBAMA During the two terms of Democrat Barak Obama, the U.S. economy slowly recovered. Between 2009 and 2015, Swiss watch exports increased 60.3% to CHF 2.36 billion, growing each year except for a slight dip (-0.8%) in 2015. However, they never quite regained the record level of 2007.

TRUMP Odds are good that Trump will bring a new Republican boom-bust cycle. Trumponomics will stimulate the economy with tax cuts directed at the wealthy and corporations, increased government spending on infrastructure and a new round of deregulation, all of which should be favourable for luxury watch sales. Then, as history and FH data suggest, look for a bust, as deficits soar.

Source: Europa Star TIME.BUSINESS/TIME.KEEPER Dec. 2016 - Jan. 2017