Coros – President’s 145% Tariffs Will Bankrupt the Company – the Winner? A: Garmin

In a separate article, I go into some detail to demonstrate that Garmin’s Made-in-Taiwan watches will attract additional tariff costs but that the company can manage those costs.

For Coros, the situation is different in order of magnitude. Its Made-in-China watches attract catastrophic costs of 145%, which a relatively small challenger brand like Coros is unlikely to mitigate.

A substantial portion of the new 145% tariff cost is paused for selected Chinese-made electronics such as smartphones and smartwatches, but the situation is rapidly evolving. This article examines what will happen to Coros if the 145% tariff goes live – and that could easily happen this week…or not!

Exemptions Under Executive Order 14257

The latest, highly publicised news is that iPhones and some other electronics have an exemption from the President’s latest retaliatory tariffs (Section 301 Tariffs) imposed on China as covered in  Executive Order 14257.

When imported, the product must be categorised under the secondary HTSUS (HS) heading 9903.01.32 (an import code) to be excluded from tariffs.

A list of regular HS codes has been published that are allowed to show that secondary designation and gain an exemption. Here is a selection of those allowed codes which cover subcategories not stated, so 8517.62.00 includes 8517.62.00.90

• 8471: Automatic data processing machines and units thereof (e.g., computers, laptops, desktops)
• 8473.30: Parts and accessories for machines of heading 8471 (e.g., circuit boards, memory modules)
• 8486: Machines and apparatus for the manufacture of semiconductor devices or electronic integrated circuits
• 8517.13.00: Smartphones
• 8517.62.00: Machines for the reception, conversion, and transmission or regeneration of voice, images, or other data [including smartwatches HS 8517.62.00.90]
• 8517.70.00: Parts of telephone sets, including smartphones
  
• 8525.89.30: Television cameras, digital cameras, and video camera recorders

How the current tariff regime impacts Coros

The country of origin for smartwatches is determined by the country where the PCBA is manufactured.

As of the time of writing, the tariff rate for wearables from China to the USA is 20%. Here is a chronology of how we got to this point

• February 4, 2025, New tariff: 10% on all Chinese imports. Cumulative U.S. tariff: 10%
• March 4, 2025, New tariff: Additional 10% on all Chinese imports • Cumulative U.S. tariff: 20% – The fentanyl tariff
• April 4, 2025 (announced), New tariff: Additional 34% to be applied April 9 • Cumulative U.S. tariff (effective April 9): 54%
• April 9, 2025,  New tariff: Additional 50% on top of existing rate • Cumulative U.S. tariff: 104%
• April 10, 2025 (clarification/update), New tariff: Additional 41% imposed on selected items • Cumulative U.S. tariff: 145%
  
• April 11, 2025 (exemptions backdated to April 5): Tariffs paused -10%, -34%,  -50% • Cumulative U.S. tariff: 20% on exempted electronics
• April 13, 2025 Exemptions confirmed to be ‘temporary’.

It’s not unreasonable to assume that the exemptions for electronics to the 145% tariff will be refined this week. What would you be doing now if you were a lobbyist working for Garmin? A: Trying to get the China tariffs reinstated.

This table looks at calculations for the impacts of a reinstated 105% or 145% tariff on smartwatches. Tariffs only apply to the import value (landed cost).

Looking at the figures, Coros would have no viable business in America. A 30% price rise is needed to revert to old levels of profitability, and then a further price rise would be required to keep the absolute profit level due to sales falling at the higher price level. Let’s say Coros need at least a 40% price hike.

A further reasonable estimate is that over 50% of Coros’s business is in America. Coros would have no business globally without America! This tariff will likely bankrupt them within months, although that depends on current US stock levels and their ability to secure working capital.

What Next?

In my article from yesterday, we saw that Garmin can wait and doesn’t have to do anything as urgently. Garmin is not impacted like Coros by the tariffs and has the security of a financial war chest.

If you assume that Coros planned a swathe of new products coming later this year, like a next-gen Apex and Vertix, then those aren’t going to happen, certainly not in the USA at the high tariff rates. If you assume that Coros has already managed to get a decent stock of existing products to USA shores, that will tide them over until the next shipment is due. That next shipment can’t happen under the high tariff regime.

On principle, Coros has several options with a few variations, none good.

1. Wait and hope that a China/USA accommodation is reached.
2. Wait, and hope that non-USA sales keep the company afloat (they won’t, although spring will be a good cash-generating season). Possibly leverage its cash position by dumping products cheaply in the UK/EU, hoping that higher absolute profits will come from increased sales of lower margin business (unlikely).
3. Raise MSRP to profitable but uncompetitive levels (unlikely).
4. Shut up shop in the USA (expensive to reverse in the future).
5. Scale back U.S. operations to marketing-only and run a direct-to-consumer fulfilment model from outside the USA – also expensive and incurs tariffs on a higher landed cost but with no US-bound overheads. I’d have to crunch the numbers, but they don’t look good in my head.
6. Change assembly to a lower tariff domain…anywhere apart from China. Get to work building that U.S. factory over the next few years, made from many tariffed Chinese parts using skilled U.S. labour that’s in short supply (it’s not an option).
7. Convince the U.S. government to add wearables as an exception to the tariffs. Coros probably has zero political leverage here, but they could get lucky if Tim Cook (Apple) does it on their behalf for Apple Watch (all smartwatches would get the exemption).

Take Out

Coros is done for unless the high China tariffs (1045 or 145%) are permanently removed. Let’s hope that happens soon. It can survive if China is tariffed similarly to other countries.

Does this uncertainty affect your plans to buy a Coros watch?