Garmin, a global leader in GPS-enabled devices and smartwatches, faces a pivotal year as new U.S. tariffs threaten to add $100 million in costs to its 2025 financials. This development, set against the backdrop of robust sales and product innovation, is poised to reshape not just Garmin’s pricing strategy but the broader watch market. Here’s a comprehensive look at what’s happening, why it matters, and what consumers and investors should expect.
The Tariff Shock: What’s Happening?
A Sudden Cost Surge
During its Q1 2025 earnings call, Garmin’s CEO Clifton Pemble outlined the company’s expectation of a $100 million gross impact from tariffs this year. The tariffs stem from recent U.S. trade policy changes, including elevated duties on goods manufactured outside the U.S.—notably Taiwan, where Garmin assembles most of its wearables.
Key Details:
- Baseline Tariff: Garmin assumes a 10% tariff on all products made outside the U.S., including Taiwan.
- Potential Escalation: Taiwan briefly faced a 32% tariff before a pause; the risk of higher rates remains.
- China-Sourced Components: An additional 145% tariff applies to materials imported directly from China, though Garmin’s direct sourcing from China is limited.
- Revenue Exposure: About 25% of Garmin’s revenue is from U.S. sales of products made outside the country, mainly in Taiwan.
The Financial Fallout
Despite reporting an 11% year-over-year revenue jump and a 13% rise in profits for Q1 2025, Garmin’s stock dropped nearly 10% after the tariff news broke. The company even raised its full-year revenue guidance to $6.85 billion, but did not increase its net income forecast due to anticipated margin pressure from the tariffs.
Why the Market Reacted:
- Profit Margins Squeezed: The $100 million in extra costs will compress margins unless offset by price hikes or cost-saving measures.
- Uncertainty: The fluid trade environment and risk of further tariff escalation create unpredictability for future earnings.
- Investor Caution: Even with Garmin’s strong cash reserves and debt-free balance sheet, the prospect of higher costs and lower margins spooked investors.
How Tariffs Affect Garmin’s Pricing—and Yours
Will Watches Get More Expensive?
The short answer: almost certainly, yes—at least in the U.S. market.
How Tariffs Translate to Higher Prices
| Factor | Impact on Garmin Watches |
|---|---|
| Tariff Rate | 10% baseline, risk of 32% on Taiwan |
| Application | Tariffs apply to import (not retail) cost |
| Mitigation | Some costs may be absorbed; most likely passed on to consumers |
| Competitive Pressure | All major brands face similar tariffs, reducing price undercutting |
Example:
A $450 Garmin watch could see its U.S. retail price rise to $470 to maintain historical profit levels—an increase of about 4.4%. If tariffs jump to 32%, the increase could be much steeper, though not directly proportional since tariffs apply to import costs, not final retail prices.
Product Launches as a Bellwether
The upcoming Forerunner 970 release will be a key test case. Its pricing will signal how much of the tariff burden Garmin intends to pass to consumers. Recent launches, like the Instinct 3 Tactical, already show $100 price jumps over standard models, hinting at a trend toward higher premiums.
The Broader Watch Market: A Rising Tide of Prices
Garmin is Not Alone
The entire watch industry—luxury and mainstream alike—is grappling with tariff-driven cost increases.
Luxury Brands Respond
- Rolex: Raised U.S. prices by about 3% starting May 1, 2025.
- Omega: Implementing a 5% average price hike.
- Cartier, Breitling: Expected to follow with 3–5% increases.
- Secondary Market: Pre-owned watches in the U.S. may see 10–31% price hikes as import costs rise and domestic inventory becomes more attractive.
Why the Increases?
- Brands try to maintain global price consistency and avoid cross-border arbitrage.
- Retailers and brands may absorb part of the tariff, but most of the increase is passed to consumers.
- The secondary market may initially benefit from lower-priced domestic inventory, but prices will likely rise as new inventory is imported at higher costs.
Supply Chain Complexity: Why Garmin Can’t Simply “Move”
Not Just Where, But What
Garmin’s supply chain is complex. While final assembly is in Taiwan, many critical components—like display panels, batteries, and sensors—still come from China. U.S. trade law increasingly focuses on the origin of component value, not just final assembly location. For tariff purposes, Garmin’s watches are considered Taiwanese-made if the main PCBA is produced there.
Mitigation Strategies:
- Absorb Costs: Garmin could take the hit to margins, but this is unsustainable long-term.
- Raise Prices: Likely for premium models, where demand is less price-sensitive.
- Reshoring: Moving assembly to the U.S. is possible but costly and slow.
- Supply Chain Diversification: Seeking alternative suppliers or locations, but this takes time.
Consumer Impact: What to Expect
Higher Prices, Fewer Choices, Slower Innovation
Consumers in the U.S. should brace for:
- Higher retail prices on new Garmin watches and other imported brands.
- Potential delays or fewer model refreshes as companies manage costs.
- Slower innovation cycles if R&D budgets tighten due to margin pressure.
- A shift toward the secondary market for both luxury and mainstream watches.
Who Gets Hit Hardest?
- Entry-level buyers: More price-sensitive segments may see smaller increases, but even modest hikes could deter new customers.
- Premium buyers: Less sensitive to price, but may face the largest absolute increases.
- Retailers: May see squeezed margins and lower sales, especially if consumers delay purchases or seek alternatives.
Garmin’s Financial Resilience and Strategic Outlook
Strong Cash Position, Conservative Guidance
Garmin remains financially robust, with $3.9 billion in cash and no debt. The company’s 2025 pro forma EPS guidance remains unchanged at $7.80, as management expects foreign exchange benefits and cost mitigations to offset much of the tariff impact.
Strategic Actions:
- Mitigations in Place: Some cost-saving measures are already implemented, others are in progress.
- Selective Price Increases: Garmin will likely be strategic, raising prices where competition is weak and absorbing costs where necessary.
- Ongoing Monitoring: The company is closely watching tariff developments and may adjust strategies as the trade environment evolves.
The Big Picture: A New Normal for the Watch Industry
Tariffs as a Structural Shift
The current tariff environment is not a temporary blip but signals a structural shift in global trade for consumer electronics and watches. Brands across the spectrum must adapt to a world where higher costs and complex trade rules are the norm.
Key Takeaways:
- Consumers: Expect higher prices, particularly in the U.S., and consider purchasing sooner rather than later if you’re eyeing a new watch.
- Retailers: Prepare for margin pressure and possible inventory challenges as tariffs filter through the supply chain.
- Investors: Garmin’s financial health is strong, but profit margins will be under pressure until the trade environment stabilizes.
Conclusion
Garmin’s projected $100 million tariff impact is a bellwether for the entire watch industry. While the company’s financial strength and strategic flexibility offer some cushion, higher costs will inevitably reach consumers—especially in the U.S.—in the form of higher watch prices. This shift is mirrored across luxury and mainstream brands, signaling a broader trend of rising costs and changing market dynamics in the global watch sector.