Tariffs on the Rise (Again) – New Justifications, Higher Rates – Episode 85

We respect these folks. They are part of our community and part of the watchmaking world. And the United States is maligning them by making these accusations.

This is Openwork, a look inside the watch industry. It is a podcast from Collective Horology. And I'm Gabe Reilly, co-founder of Collective. And I'm Asher Apkin, co-founder of Collective. Collective Horology is an independent watch retailer based in Ventura, California. We carry a wide range of independent brands, including Chapek, Singer Reimagined, Sartori Biard, and more. To learn more about us and check out our available inventory,

visit CollectiveHorology.com. Hey, you were kind of freestyling on the brand list there. Was there something you're trying to get at? Yeah, I just didn't have the script up. So, you know, thanks, man. Fair enough. Well, speaking about lack of preparation, or I guess

in its own way, this is a form of preparation. Summer hours. Now, we're basically going to be switching the podcast for the summer. So that will probably be July or what's left? July and August. June, July, and some of August to bi-weekly. So we went to weekly at the end of last year, which has been great. But you and I need to switch to bi-weekly, not because we're men of leisure in the summer months. It's more because we're men with a lack of child care over the course

of the summer. And so that means you and I are trading some time in and out of the office and traveling, doing family things and all that kind of stuff. And in order to do the podcast at the level that we aspire to, we're going to do it bi-weekly. This is one of those podcasts that does take a fair amount of research and preparation. You know, we're not just shooting off the cuff about what's on our wrist or, you know, what caught our eye or crossed our desk.

So we have to put in time to prepare. And it's frankly best when we can do these things in person and there are just going to be fewer opportunities. So for the summer months, every other week. And, you know, that means we've got to hold back catalogs. So the podcast has grown in the last year quite significantly, which is remarkable. It also means there's a lot of

new listeners and there are some fantastic back episodes. A lot of people actually continue to go into the back catalog and listen as the podcast downloads would suggest, but there's a lot of good stuff in there. So if you like the podcast, if you want to listen to it weekly, you still can because we're 85 episodes deep and we need to start thinking about episode 100. Yeah. Absolutely. I've got something in mind for that. Now I've got something in mind for episode 100,

but we can talk about that. A tattoo? No. Yeah, maybe actually. Let's talk today about a couple

of things that have, that are brewing or have gone down. I mentioned I went to Vegas for JCK, which like I said, a tattoo. There's a lot, there's a lot to talk about there. And then there's some news in the world of tariffs, which I know you've researched quite a bit and are prepared to talk about. I think a lot of times we think tariffs have gone away. They're a thing of the past. Remember that liberation day? Then everything went back to normal. Well, do you

feel liberated? Well, I'm not getting into that, but the saga, I do not feel liberated. Well, no, I don't feel liberated. And we'll talk about that. It's a very difficult environment to run a business in, but we'll talk about what's brewing with tariffs, more changes coming and likely from where we are now with tariffs, increased tariffs. They're going back up. So we'll talk about that, but why don't we start with JCK? Yeah. So I wasn't there. You were. So why don't you help

everybody understand exactly what JCK is? Yeah. So JCK is this massive trade show that happens every year in Las Vegas. So JCK itself, the company, the brand JCK is essentially a B2B trade publication for the jewelry industry. Predominantly, they do also cover watches. Our friend, Victoria Gomelsky, she is the editor-in-chief of JCK. So she obviously covers jewelry, but she knows a ton about watches and covers watches as well for the New York Times

Rob Report. So it's sort of a watches and jewelry trade publication. And I don't know if they licensed their brands to a third party or if they run this show themselves. I believe they run the show themselves. Okay. Well then there you go. They run this annual trade show for the watch and jewelry industry, but predominantly the jewelry side of the industry. But with some exceptions, we'll talk about every year in Las Vegas. So if you can imagine your typical run

of the mill, giant Las Vegas trade show, that's exactly what this is. It happens at the Venetian, not so much in like the conference rooms in the Venetian, but the Venetian and the Sands originally, which was there, have a large convention space. So just think of any large convention center in any city around America, this is, or anywhere around the world, the Palexpo would be kind of equivalent in size. Like the Venetian has a massive multi-story convention

facility inside of it. It may be one of the biggest convention spaces in Las Vegas, certainly after whatever the primary Las Vegas convention center is. There's the Venetian. I know Mandalay Bay has a big one, but this is a massive trade show space. I mean, truly a massive trade show, but it's predominantly focused on the jewelry industry and sort of the target audience for this are jewelers themselves who are looking for wholesale and are also looking for B2B services.

So on display there, you have everything from jewelry brands who are like at trade shows we attend for watches or plying their wares, whether that's diamonds, a lot of diamonds, and a lot in the area of lab-grown diamonds this year, whole section of the floor, massive, massive space. I mean, not only does this fill the convention space at the Venetian, but it does spill out into

all the conference rooms and things like that as well, multiple levels. You also have, aside from sort of those wholesale partners to jewelers, you have people who provide services. So a lot of the companies that we use, so for instance, Jewelers Mutual is there, they're an insurance company. I'm sure IFS, our shipping provider and shipping insurer was there as well. I was, funny enough, you never know who you'll meet in the line for the bathroom.

There was a water main break at the Venetian and one of the levels of the convention hall, the lower level of the convention hall got flooded. And so as a result, they had to bring in all of these like porta-potties and there were huge lines for the restroom, which made for restroom chat. I spoke with a guy from New York who runs a security company and he- What kind of security? Like they install security systems. Oh, like physical security.

Yeah. So they install motion detectors, cameras, security, video surveillance, CCTV, like if we were in New York and we were in the business we're in and we needed to install a security system, we would probably call this guy's company because he focuses specifically on watches and on jewelry, which was fascinating. But so you had all these people, you did have

watches there. Primarily most of the watches were in the lower level. There were a ton of wholesale watch dealers there, a lot of gray market type stuff, a lot of gem set watches. So there were some third-party dealers that were looking for inventory there. Yeah, yeah. But it's- It's kind of like the antique watch show down in, where is that? In Florida. Yeah. And there may even be an affiliation with whatever the trade organization is for

pre-owned watch dealers. I can't remember. But so mostly B2B, but there were people there, which I think is interesting. Georgia Benjamin, our friends are covering it. And she actually went to Matt Bain's booth and he had some really beautiful vintage stuff, of course. Yeah. He's a well-known, famous dealer here in Southern California. Out of Florida. Florida. Excuse me. Pardon me. Actually. So, but very, very, very focused on B2B and very focused more so on the jewelry side. Now

this is the first year JCK made, they used to have a lot more watches there in the past from what I understand from Ariel Adams, who's been going for almost 20 years. But this is the first year they're making a concerted effort to bring watches back in and not so much B2B wholesale of

pre-owned and vintage pieces, but like to have watch brands there. So there was another section of the show in kind of the hotel kind of ballroom conference room space where a number of watch brands had sort of set up kind of like watches and wonders or Geneva watch day style. Touch and feel rooms. Yeah, exactly. So in there you had citizen group brands, you had Casio and that was by far the highlight. You of course had fossil group. You had a number of watch brands who had set up in

that space and were taking appointments just like it was a watches and wonders. But these were very much watch brands who focus on jewelers as their distribution network. So if you think about like, where do you find most Bulova or Citizen or G-Shock watches, they're independent jewelers. But I suspect based on one, that initial sort of beachhead of those brands. And then two, the addition of content around watches, this is sort of a first shot. So in addition to those

brands, they brought in a ton of content creators around watches. So like Derek Minuteman, Georgia Benjamin was there. I met a number of people who are sort of content creators. They also partnered with the FHH, which is the Swiss Foundation of Horology, which focuses on education around watches and watchmaking. And they ran a whole series of panels and watchmaking programming, including like a movement disassembly and assembly workshop that apparently had a packed turnout. I did a panel

with them on sort of the future of watch retail. They did other panels about like trends that watch retailers need to know, things like this. So a lot of people were creating content around JCK. Zach Kazan from Warren and Weiland was there. And this was the first year I noticed in social media that it would appear from the outside in that like, oh, there's this like new show JCK for watches and all the watch media and the content creators are there and they're taking meetings with brands.

It kind of looks like what we see from Geneva watch days or watches and wonders. And I would put a big asterisk next to that. So I think it's great that they're getting into watches. I think it's great that they did that not only with the brands that they started with this year, and they also had an eye to content. I think the challenge is, so two things. One, I think this could grow as a meaningful trade event for the watch and jewelry industry with a focus on a greater focus

on watches. No doubt there will be more watch brands next year who want to sell into retailers. I don't think this event will ever get to the level of in the mind of a watch enthusiast, it will never get to the level of watches and wonders or Geneva watch days. Now on some measures, this show is bigger than both of those combined in terms of the number of vendors there. And I'm sure attendees and things like this, I cannot state enough what a massive show is, but it's

very, very, very, very B2B focused. And what watches and wonders has learned to do well, and what Geneva watch days has always done well is have an eye to two things around meeting, beyond meetings with dealers and around wholesale. One is they've turned it into a press and a media moment. So brands now launch watches around those events, which amplifies them. And two, they've also made great strides to bringing the public in and to bringing collectors and

enthusiasts in. And that won't happen with JCK. Let me give you an idea of what was required for me to, and I was a speaker, what was required for me to gain admission to JCK. First, I had to prove that Collective was a legitimate retail business. I had to provide any number of forms, including a business license or a reseller's certificate to prove that we are a retail business. Then I personally had to provide a copy of either my pay stub

as well as really personal information. You can black it out and things like that, but you have to show that you're an employee of this organization. And then you also have to provide, whether you're an individual or a business, you also have to provide at least three invoices from watch or jewelry brand suppliers. That proves you buy stuff totaling

at least $10,000. So not a huge barrier, but there's no way like, now, of course you could forge or fake those documents, but if you weren't in the industry, how would you even know what to forge or fake? So there's a real barrier to entry here. They specifically do not want the public in, and it's not enough to be invited. It's not enough to just say like, I work at this company,

here's my business card, or look, it's a retailer or whatever. And even if you're a subscriber, like a trade subscriber to a JCK or something like that, you still have to prove and provide all of this documentation that's rather hardcore. That's like, no, I am, I work in- It's a security thing too. It's a security thing, but I think what that means is like, this is a place that is very much keeping the outside world at arm's length. And even a lot of like the panel topics were kind

of sensitive in nature. So like the kinds of questions that were being asked on the panel I'm at, weren't the kinds of things that you would talk about like in a panel on like, it wouldn't be relevant, but it's also kind of sensitive stuff. Like, I don't think this is that crazy or sensitive, but like one of the things that came up in the panel that I was on was like, the difficulty of hiring, training, and retaining boutique staff.

Yeah. Which is of course relevant for our industry, but less so for a general audience. Yeah, exactly. Just like any other trade show, frankly. Yeah. I ran into our friend, Barbara Palumbo. She ran a panel on kind of five trends that watch retailers need to know. And this was like practical nuts and bolts business advice to them of like, for instance, like one of the things she talked about was like the importance of having

like multi-brand events in your store. We know that, but like it was very kind of nuts and bolts things. And it was, these are things that people could talk about freely knowing that this is a closed door event. The public isn't there and the audience is B2B. So it is a massive event. It's really cool. I think you and I should go next year just because the number of suppliers are there. Who are there could be really helpful to our business, whether it's shipping, insurance,

we need to buy more safes. I'm sure we could buy some safes there, things like that, or learn about different services, technologies, products that would help us run our business better. So I think there's no limit to the potential of the show for the industry. I think watches have a huge potential upside. I'm just excited to see, we don't have any trade shows like this in the United States, not really. So, and the ones that we do are mostly consumer focused. So I'm excited to

see what they're doing. Yeah. But I don't think this is the kind of thing where we can point to, like when we talk about Geneva watch days is like becoming the number two platform to watches and wonders or how New York watch week is probably a top five watch event. It's because it spans B2B, it spans consumer and enthusiasts. It gets mainstream media and press attention. These

are moments that have an impact in the world and culture in general. Like people hear about what's released at watches and wonders, or even what happens at New York watch week, whether or not they're even interested in watches or not. JCK will never get to that place, but a trade show with a significant watch content and growing, I think is a tremendous thing for the industry to have in the US. Well, thank you for going. And I am extremely excited to see what comes out of this

in the future and how it develops and grows. It's great to see this kind of stuff happening here.

It is. Now I have to tell you the highlight for me, yeah, was Casio. I spent some time and I walked around to the different brands and I probably visited with five or six different brands. And what I saw from Casio was extremely impressive across a number of price points, things that cost a hundred dollars that are new products that are coming this year, that are really great, really cool. All the way up to things that are coming this year. We talked about the

success of Casio a couple of weeks ago. I saw a watch that will cost from them, that will cost tens of thousands of dollars. And it's one of the coolest watches I've seen this year. And I saw some watches from them that will cost a few hundred or maybe about a thousand dollars that were incredibly creative, that had unimaginable case construction and really interesting use of unusual materials. So it was really helpful to go see that right after we had

talked about the Japanese, the Japanese watch market and the financial growth of that. I didn't know a ton about Casio. I'd never spent that much time hands-on and I was truly impressed. And it again, just goes to show you, here's a brand that is not defined by a price point, but a philosophy of watchmaking that can start at a few hundred dollars or go all the way up into the tens of thousands. So if you're a fan of Casio, or even just curious, I think this is a brand to keep

your eyes on. I love that. I love some G-Shocks. All right. Now, tariffs. As always, Asher is

combing through the headlines and the minutia when it comes to this stuff. And I think the reason we're chatting about this, like I said at the top, is a lot of people think that the news around tariffs have come and gone. I know plenty of people, even in our industry, who think, oh, tariffs went away. It's not a thing anymore. Either people lost interest after Liberation Day when Trump sort of moved the tariffs back to about 10 percent or the Supreme Court overturned

the tariffs. I'll give an overview of this, but in brief. I think a lot of people are like, oh, that's a thing of the past. And it's not. There's a lot happening. So the United States is still living under a extremely aggressive and brutal tariff regime, which has been in place since April of last year. However, what's been pivoting and changing has been the justifications that the

administration here is using to legally prop up these tariffs. The Liberation Day tariffs that you're referring to were justified, and now we know were completely illegal under IEPA, which was

a law that never gave the president the right to do this. I'm speaking with definitive terms there because the Supreme Court has been settled. So those tariffs, every tariff that the Trump administration imposed from April of last year until February of this year, were and are completely and totally illegal. And those did material damage to a lot of people. Not only to our economy, but to small business. I mean, I'll be completely candid. Collective

itself is out hundreds of thousands of dollars in tariffs that we may never see again. We expect, we hope to, but we don't know what will happen. Once those were made illegal, the Trump administration used a new justification to immediately slap global tariffs in the world. Then in about February. This was in February, and that was something called Section 122 of the Trade Act of 1974.

Now, Section 122, in brief, gives the president of the United States very broad power to put up to 15% tariffs on countries where there is a severe trade imbalance, and it's designed as a tool of last resort. It's a blunt instrument. And the Trump administration applied that to every product on earth and every country on earth, with maybe one or two exceptions based on how some groups lobbied.

Now, I think it's reasonable to assert that it is highly unlikely that we have a trade imbalance on every single product category from every single country in the world, which is why a lawsuit was actually brought, not any relation to us, but a friend of ours who owns a spice import business called Burlap and Barrel. And Burlap and Barrel successfully sued the Trump administration about six weeks ago and got a fascinating ruling, which essentially

said these 122 tariffs are also completely illegal. However, the Court of International Trade, which is the first court, is essentially the primary court for hearing disputes of this nature. It's a federal court, was unwilling to provide universal relief. So what that means is only Burlap and Barrel is exempt. And even they are currently staying. Yeah, I think there are a few others party to the suit, but the state of Washington.

It's a handful. No, actually, the state of Washington did not get any relief. Well, they were party to the suit. They were party to the suit. But anyway, the point being, so we're in this interesting place right now where these tariffs, which also have a statutory expiration date, which is coming up in July. Yeah, so the section 122 tariffs give the president broad authority, but they have two

limitations. One is the tariffs can only be at 15%. They're actually at 10. And I think that was probably because I'm going to guess they're like, well, look, we have some trading partners who are at 10, so let's not go higher than 10 on a blanket tariff. But the other thing is an amount of time. I think it's 90 days. No, it's 150. 150. So that's why we're going to see them expire on July 24th. So what fresh hell is next? And they cannot be renewed.

Hey, it's Gabe. Now, if for some reason you find yourself wondering what you can do to support open work and the good folks at Collective Horology, you can, of course, pick up an independent watch or maybe some merch at collectivehorology.com. But really, the number one thing you can do to support us if you're enjoying the podcast is give us a rate and review on your podcast player of choice. That just goes a long way to helping the right

audience find this show. And while you're at it, you can check out and please subscribe to our YouTube channel where we've got hundreds of videos on independent watches and, of course, on the business of watches. Thanks so much, of course, for listening and for your support. We hugely appreciate it. We never take it for granted. Let's get back to the show.

So with this time, there's a gentleman named Jamison Greer. Jamison Greer is the United States trade representative. This is the diplomat that is responsible for trade negotiations. Now, Mr. Greer has spent the last last few months being a real busy beaver. He has been concocting a bunch of fascinating theories, and they bump into two different buckets. Now, why

would I name check Mr. Jamison Greer? It's because in order to actually in order to actually implement a Section 301 tariff, which is the next ball of fun that's coming our way. Section 122 is roll off. So now the administration is saying, oh, well, we have a new justification we can roll out. Now, Section 301 tariffs are under the same Trade Act of 1974.

It's under the same Trade Act, but it is a different kind of tool. Now, this one requires there to have been public comment as well as research done into some issue tied to a trade inequality. And it creates a couple of problems for consumers and anybody running a

business because there's a lot more flexibility in the tariff rate. And it's a lot harder to challenge these legally, because even if someone made a dog eat my homework level research report, which is what we are hearing, I don't know, nor am I an economist, and nor can I speculate having not read them. But we're seeing from serious economists some feedback that these appear to

be slapdash reports based off of two main areas of investigation. Now, there's a bunch of stuff going on with Section 301 with China, which I'm not going to get into because it's a whole other topic. But we're going to look at the countries that impact the watch industry. So for the countries that impact the watch industry, there's two areas where the Trump administration is making some pretty aggressive claims. The first is around forced labor import prohibition failures.

So what does that mean? What that means is we are going to be saying that 60 countries around the world rely so heavily on forced labor imports that we are going to penalize anything that we buy from them. So what that essentially means is if they are creating products that source components from an economy that's known to use slave labor or poor working conditions or things of that nature. On its face value, that does sound noble. In practice, though, there's two major challenges

with this. The first is the United States. There's an argument to be made that we are, in fact, consumers of very aggressive forced labor practices here in the United States is legal, for example, to pay pennies on the dollar for imprisoned individuals. So folks that are incarcerated and forcing them to work. Well, I'm sure he's making an argument. I'm not even even if we were to say, put that aside because people have different views on that. Oh, no, to be clear,

this is the argument against them. Let's make an apples to apples comparison. If we're saying, for instance, the Swiss, we've talked about the prevalence of Chinese components in Swiss watches. If we were to say the Swiss are participating in forced labor because they are purchasing in a lot of their componentry from China, who is notorious or has a checkered reputation on labor. And that's the justification. Well, how much do we buy from China? Yeah, well, there's more. There's more to

that, too. China has over a billion people in it and plenty of different companies and saying and painting with a broad brush, for example. And again, I want to separate China because the way that the country, the way that the Greer and the Office of the U.S. Trade Representative are approaching their programs separate out China in a lot of ways from how they're talking about this. I would assume that the forced labor, the forced labor argument against Switzerland probably

includes China. To be honest with you, I don't know because I'm not even looking at that. I'm just looking exclusively right now at the markets that impact our industry. But that's the claim they're making. Now, the other interesting thing about it is that it's not a blanket tariff tool. So similar to a different from the way that the government attempted to use IEPA and the way that they're currently using Section 122, Section 301 is supposed to apply to specific harmonized tariff

codes, in other words, specific products. Now, that would make sense, right? Let's say that you're going to a country and you're saying, hey, we know that all the shoes that you make are and here's the report that proves from a human rights standpoint, this point about this harmonized tariff code and the point, the point of doing that generally would be to apply economic pressure on an economy to invest in fair trade. Again, on surface value, I don't think that's a bad thing.

Now, the United States government, however, is attempting to do that on every single harmonized code product from a country. So to be clear here, a harmonized code refers to every product, a shoe, a nail, a watch movement, whatever it might be, a cardboard box has a code, what's called a harmonized tariff code. And it's called harmonized because every country in the world, their customs systems essentially use the same code for a cardboard box or whatever it might be.

So what we're saying is every product that has a code for customs or an identified, it's almost like a UPC or a SKU number is what a harmonized code is essentially. Every different kind of product these will apply to. So it's not just shoes because you're using unfair labor practices for shoes, it's shoes and cardboard boxes and plastic bags and whatever. So we fully anticipate that there will be a base tariff of at least 12.5%. That's the forced labor. I'll get to the

other one in a second. On Switzerland, for example, we do not know if duties will be exempt as they were from IEPA or if they'll be stacked. So we could be looking at a base tariff plus duty rate of somewhere in the 15 to 16%, which is about 6% higher than it is right now. And there's another thing going on too, which is around structural excess capacity, an accusation that an economy is flooding the market with goods for which there are no buyers.

So essentially they're overproducing. And if they're able to do it at a lower rate, that's unfair to producers in this country or among other trade partners and allies. And as of right now, both the European Union and Switzerland are included in that

interesting investigation by Mr. Jameson Greer. So Mr. Greer is attempting to state in his belief that there is both a unbelievable plague of forced labor in 60 plus economies around the world and such a threat of structural excess capacity on the majority of goods produced by those countries that it is the United States' economic responsibility to apply, once again, punishing tariffs on the American people for buying these goods.

And I would suspect the same logic applies here. So this might be the argument that was made initially around Chinese steel. The Chinese are producing cheap steel, flooding the market with it, and that's detrimental to, say, the U.S. steel industry. Yeah. And the fundamental issue with this, and this also, I think, is a core challenge. Put aside the financial and economic impact of tariffs as a tax being placed on the citizens of a country.

By painting with such broad a brush, they're actually ignoring some legitimate challenges that are out there. That's true. So by saying everything- Exactly. What was this? Structural excess capacity. Okay. So saying if structural excess capacity applies to everything, then it applies to nothing. So let's go back to Chinese steel. I think you could legitimately make that argument that that's a problem. There's a reasonable argument to make.

Correct. There's also an argument to be made, for example, of tariffing Chinese EVs in the United States based on the current structural realities of developing and building American ones. But if you tariff or tax everything at the same rate, then you're effectively not punishing that particular product or that HTS code that is a real- Exactly. And I'll leave it to the political podcast to get into the machinations about why Donald Trump and his administration may wish to do this.

Yeah. But I think from our standpoint as small business owners- It also seems like, I'll be honest, seems like they will come up with any reason they can to tariff things. Well, that essentially is the basis of the Section 122 lawsuit that Burlap and Barrow won, which says, this is clearly not based on any form of meaningful economic problem. It's capricious. And that was essentially where the Court of International Trade came down and agreed.

So here's ultimately, if we zoom all the way back, what are we looking at?

What we're looking at is from July 24th of 2026 on, we're probably going to see a base tariff of somewhere between 12.5% plus duties. We'll find out about the duties that we don't know about yet. And that might be stacked with this other structural excess capacity thing. And if you stack those two things, then you get back to the Trump administration's desire to get back to 20, 30, and 40% level tariffs on some of our allied- So they may say, here's what we want to get to.

So we'll stack these things. Now, the US- And it's much harder to challenge these in court because they have these goofball reports of one by one. Well, not only that, it's a lot harder to say that these are capricious when there was a report. It doesn't matter, because then you're going to have to go through every element of the report and those lawsuits and the discovery phases and things related to them. It's a different animal than the previous actions.

Correct. Now, in the US's trade agreement with Switzerland that came out at the end of November, one of the parts of that agreement, which I would assume still generally holds- Well, this is a question. And I'm glad, before you even go there, this is a really important point. A lot of economies made deals with the Trump administration- At a particular rate. Correct. And now they may turn around on that.

And I think the real question is, at what point are these other economies going to say, you know what, we've had it, and basically start applying economic pressure and punitive damages back on the United States, which is something that essentially very few economies have threatened, let alone done. But the EU is getting- Well, that's above our pay grade.

I think it's important to just point out, because look, we are currently in a situation where we're seeing inflation increase to 4.2% as reported as of what, yesterday morning, this morning? Yesterday, 4.2%. And we're seeing a continued depreciation of the US dollar, which is a secondary order impact of some of these tariffs, as well as other economic realities and other things happening in the world.

All of this is making goods for American consumers more expensive and export for American trading partners more complex. That's the reality of the world that we're in. And it's very unclear to me, as a business owner, what we're ultimately trying to accomplish here, because while all of this is happening, we're not seeing investment in American business. Because that was the whole argument in the first place, right? The whole point of a tariff is to protect a domestic economy.

And that's not happening. Yeah. Our trade deficit with a number of countries has gotten worse, not better. So here's the thing with the Switzerland deal. So in November, when they negotiated that 15% tariff rate, there's an important detail in there, which is Switzerland became what's considered a most favored nation and received a most favored nation rate of 15%, which meant that even if tariffs or duties were stacked, they could not exceed 15%.

So what we saw was the US put in place a 15% reciprocal tariff when we got our bills and the itemized statements from customs, you could see, okay, there's this 15% tariff. Then there'll be other line items for other duties, like the duty associated with importing a watch movement or the duty associated with a case or a strap or a bracelet. Those would all be at zero.

Because basically the deal was we will treat Switzerland with this most favored nation rate, which means the tariff is 15% and it can only go up to 15% no matter what stacks there. So the duties that stacked upon the tariff didn't apply. So the question would be, if we get to this place where we have these under section three, what was it? 301. Section 301. We have this forced labor thing. We have this flooding the market thing. Then we have duties.

It'll be interesting to see if those get capped for Switzerland at 15%. If they don't, if they don't, tariffs are effectively going up on Switzerland and these other nations. Yeah. And also it begs the question, if we're so bothered by the asserted forced labor implication on the Swiss, as well as the structural excess capacity in June of 2026, it's fascinating that we didn't seem to care about that when we signed the deal in December of 2025.

Yeah. Well, this gets, again, this gets back to litigation and it's just capricious. Exactly. So anyway, putting all of that to the side, the bottom line here is we're probably going to see prices get hit again. Because you have the dollar weak against the Euro and the Swiss franc. You've got 4.2% inflation and rising. The rate is growing and increasing on inflation. And now we have tariffs potentially increasing all over again. And this creates two problems.

One is rising prices, but two, it creates a very difficult environment in which to run a business. Yeah. So I think this is, this is a rough place, economically speaking. And let's let alone all the other things that are impacting the global economy right now, which is the watch industry. Now, if the watch industry has more headaches coming with the U.S., the U.S. has been their one bright spot. Europe and Asia have been very choppy.

The U.S. has been kind of the leading light of the watch industry. And remarkably, the consumer in the U.S. has been incredibly resilient and having more problems with the U.S. market is the last thing you want if you are running a watch brand in Switzerland right now. And there's one other thing too, that I just want to add, because it's important as we think about how all of this comes together into a crazy brew for pricing.

The watch industry relies heavily on derived products from petroleum goods. So when we think about synthetic lubricants or greases or things of that nature, that all comes from petroleum-based products.

And as we're dealing with some of the economic turmoil and the straighter for moves and lack of access to this, and we're seeing this have obviously have an impact on all sorts of other economies, well, economies, certainly, but sectors as well, agriculture being one in particular, which is heavily reliant on- The plastic in a moon swatch is only getting more expensive. It's not just the plastic in a moon swatch.

As I was mentioning earlier, it's also petroleum-based goods, for example, that relate to fertilizers. And we also see this now- Shipping things around the world. In synthetic oils. Exactly. Shipping things around the world. So all of these things- The inputs. Are coming together. Like if we roll it back to April of 2025, all that needed to happen in order to stop the economic distress was for Donald Trump to stop, to just not apply tariffs. And we saw that.

We saw that happen when he backed off and- Well, he backed off to 10%. Right. But my point is, we saw that and we saw the economies basically going, and we're able to move forward. But now there are things that are outside of any one country's control other than making it worse. And that's sort of where we are. The industry has already wrung all of the inefficiency they can out of things.

Well, and this leads to the- So one of the things that came up when tariffs went to 10%, we heard a lot of brands say, and we said as well, like, we're going to find every single penny we can under the couch cushion. And some brands even said, we can figure out how to deal with a 10% tariff and not increase our costs. And for a lot of retailers or importers like ourselves, we were like, we will take this on the chin and we will figure it out.

Hence the hundreds of thousands of dollars that we lost to IEPA tariffs. We will do everything we possibly can to wring any inefficiency out of our business so that we're not passing these on to consumers. Now, when the tariffs went up to 39% on Switzerland and back to 15, that was no longer a possibility.

If they go up again, there is no more inefficiency to wring out of the industry- Well, not only that, I think the cushion is the point I was going to make, which is I don't know how much appetite, interest, or available capital there is to keep pumping into this tariff regime, which means from a practical standpoint, things will become more expensive, which goes into the larger issue around inflation, which is exactly what we're seeing on the aggressive rise. All right.

What do you do about this? What do we do about this? The truth is there's no one thing that any individual can do, but I think it's important for us to all know about it because this is an industry that we love. If you're listening to this podcast, it's a business that you love too.

And I think it's important for us to look at what the accusations are from the US trade representative to the rest of the world as the justification for tariffs because one of the greatest, I think, bummers of this whole thing is how tariffs have been turned into such an aggressive, punitive tool when they actually are and were such an important tool for the development of fair trade in the world.

Tariffs were part of a very sensitive global ecosystem that helped keep free trade and some degree of equilibrium globally. Yeah, when you apply it sparingly, it actually is meaningful. Absolutely. And unfortunately, now, because it's being used so aggressively, it's no longer that. It's a political tool. It's a tax. Exactly. Well, it's a political tool that manifests as a tax on the American people with second order impact on the rest of the world.

Well, it's a tax in the sense that it's just something you need to pay as a course of doing business or buying anything. It's just a fact. Right. So that's where we are. I, of course, until and unless, unless until we get to July 24th, we're not going to know what the actual, you know, because we know what they say they're going to do, but we don't all figure. I mean, here's the other. Here's the one thing that gives me some hope in all of this. We've figured this all out before.

We sure we've when it comes to tariffs and economic uncertainty like we we've seen when have we seen this particular chapter? No, but we've navigated enough uncertainty that to some extent navigating uncertainty has been just part of the business environment for the last year and a half. Like we'll figure this out. The world will keep turning. We know of, like I said, with Casio, for instance, so many amazing watches are coming.

So many great things to be excited about in this hobby will continue and are coming. And there is more to look forward to than there is to sort of fear. I do want to point something out because it's really important on the other side of these tariffs or accusations that are being used to justify the tariffs are some pretty aggressive claims that in certain cases we know are untrue. And I'll give you an example.

There is a 10% forced labor section 301 proposal being levied against the United Kingdom. I can tell you with absolute fact that there is no slave labor being used in the creation of a Garrick watch. I know this for a fact, and it sounds ridiculous to say something like that out loud, but I think it's important to do that because we're levying as a nation right now, pretty stark accusations across an entire country.

Can I say that there aren't any forced labor practices or products that use components that are forced labor that are manufactured in the UK that I cannot speak to? I don't know, but I can certainly are. Yeah, I'm sure. I'm just like there are here in the United States, but I can say with absolute facts that that is not the case for someone like Garrick or, you know, and I can say that that's probably not the case.

And we know that that's not the case, for example, for fears because they tell us exactly who supplies the products. So my point is, look, it's pretty clear. This is all an end in search of a means. In other words, it's like we want to levy a tariff, so we're just going to come up with any technical gymnastics we can. I think that's pretty clear. And I think it is.

But I say all that just to point out, I think as watch collectors and members of this community, it's important to be able to look at what's being said versus the reality. And if you're paying a tariff on someone who is accused of these things, that's not happening. It's really important, I think, for us to say that stuff out loud because we respect these folks. They are part of our community and part of the watchmaking world. And the United States is maligning them by making these accusations.

So before we go, let me ask you a question. Sure. What do you really think about these tariffs? All right. All right. I will. I will. I will answer that in one way, which is that wasn't you're going to take the bait. It wasn't a real question. I do think, as I said earlier, it is important for every country to look at the tools that they have to ensure free trade globally. But that is fair trade globally. But that is not what we are doing.

And I think it's important for us to say that sort of thing so that we can hold our head up high when we go and meet with folks in other countries and say clearly and loudly that we know that this is not true. Yeah, I think you're right. Look, I did say this is an end in search of a means, but when the means is to say like you're participating in slave labor, that's a pretty damning accusation, not one that should be made lightly. And I wish we're done with more thought and decency, I guess.

Guess we're going to leave it there, huh? Well, this is open work.

It's a production of Collective Horology. And you can find us online at collectivehorology.com. And of course, please do get in touch with your suggestions, your thoughts, feedback, all that good stuff. We'd love to hear from you. And to do that, you can email podcast at collectivehorology.com. I don't have it up, so I'll just make it up.