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.
- Wait and hope that a China/USA accommodation is reached.
- 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).
- Raise MSRP to profitable but uncompetitive levels (unlikely).
- Shut up shop in the USA (expensive to reverse in the future).
- 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.
- 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).
- 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?
The IP theft that takes plan in China when manufacturing moves there is rampant and doesn’t exactly engender much sympathy for Coros from me. Especially when you look at the, ah, similarities in their UI and other aspects to Garmin.
I have sympathy with the generality of what you say.
However, if one product looks similar to another product that is not IP theft. In the UK that might fall under ‘passing off’ legislation…still not good. I’m not even sure that coros could be accused of passing of its products as Garmin even with the original Pace 1. similar but…
China is patently guilty of IP theft on an industrial scale. I know some senior execs of very large companies that have been bitten.
Also worth researching is china’s investment in Brazil buying numerous comapnies then relocating everything back home, destroying the brazilian economy (Brazil would be a much more important country now ad that not happened)/
Yes, I’m sure you’ve heard of what is happening with WeatherTec for example. I’m not crying any tears in this situation.
never heard of them!
Good riddance!
I am not a Coros customer. I’m a fenix guy but I think they have been good competition for Garmin. I think we have more consistent updates, much better battery range, and better features from Garmin because of competition from Coros. That’s great whether you are a Coros customer or a Garmin customer. I don’t want them to be put out of business because of stupid 18th century mercantilist trade barriers. That makes us poorer and makes it more likely that Garmin prices creep upward without meaningful feature improvements.
Choice is always good.
I suspect Coros has rarely pushed Garmin to do anything outside of pricing – Track mode being the obvious feature example that garmin probably was working on in any case.
Ive been looking at the triff side of things a bit more and a surprisingly high number of comapnies are impacted simialrly to Coros – obvious when you think about it but triffs have brought COO to the forefrony of my mind if nothing else.
Probably Coros should pay their tax in US first!!
indeed so.
ALL multinationals should stop abusing internal transfer pricing and spurious costs associated to brand values to artifically increase costs in certain markets. ALLL multinationals should start paying tax on the profits where they are earned.
I have ZERO sympathy for those that don’t pay their fair share of taxes…sadly that’s pretty much all of them.
You mention Coros depending on USA sales but don’t provide figures. What percentage of their sales is in the USA?
AFAIK, that information is not public so i had to make a sensible assumption.
I looked at Garmin’s annual accounts which shows pretty much exactly 50% of sales are from the *AMERICAS* for calendar year 2024
I would assume Coros has a higher focus and reliance on the USA. so 50% in the *USA* for Coros
If I had to bet I would say it is an even higher percentage than that but that is an indicative enough figure.