`Trump Effect' Unsettles U.S. Economy, Swiss Watchmaker Says

  • 2016 isn't growth year, says chief of luxury brands at Swatch
  • Strong franc, refugee crisis, Russian politics cloud outlook

Donald Trump’s presidential campaign is destabilizing the U.S. market, adding to the Swiss watch industry’s challenges this year, according to Marc Hayek, who heads Breguet, the maker of $100,000 luxury timepieces owned by Swatch Group AG.

“In the U.S., you’ve got a Trump effect,” Hayek said in an interview with Swiss newspaper Der Bund. “This has unsettled a country whose economy is actually in relatively good shape.”

Trump, the front-runner to secure the Republican Party’s presidential nomination, threatens the U.S. economy as restrictions on trade would ultimately hurt consumers, Thomas Donohue, chief executive officer of the U.S. Chamber of Commerce, said last week. The real estate magnate has said the U.S. is in “serious trouble” as it’s losing jobs and money to foreigners. Trump has vowed to deport undocumented immigrants, block trade pacts that encourage outsourcing and intimidate China into giving U.S. businesses a better deal.

Trump’s proposal to prevent Muslims from entering the U.S. would worsen a decline in tourist-generated retail sales, according to Melissa Avstreih, a Bloomberg Intelligence analyst. A shaky global economy is already taking a toll on luxury-goods makers like Tiffany & Co., which saw weaker spending from foreign visitors in cities such as New York last year.

Sales at the brands Marc Hayek manages -- which also include Blancpain and Jaquet Droz -- may rise or fall as much as 5 percent this year in Swiss franc terms, he said, according to a Swatch spokesman, who confirmed Hayek’s comments in the interview. The strong franc and Russian politics also make the outlook less clear. That comes as tension rises in the European Union as the bloc struggles to find a way to deal with the flow of Syrian refugees entering the trade zone.

“2016 will be no growth year,” Hayek said. “We’d be happy if sales remain stable. Who knows how the refugee situation continues, or how relations with Russia develop?”

While Trump’s plan to deny Muslims entry probably wouldn’t become law, the rhetoric alone may deter Muslim tourists from visiting the U.S., Avstreih said. Middle Eastern oil wealth is a big market for Swiss watches. Trump has also promised tax cuts, which could increase disposable income.

— With assistance by Alice Baghdjian, and Phil Serafino

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