With a mere month passing since the U.S. government unveiled a 20 percent tariff on European Union imports, the luxury goods industry is grappling with an unexpected upheaval. As brands prepared for a prosperous era marked by deregulation and a buoyant market, they are instead confronted with a landscape filled with uncertainty, particularly regarding their prized "Made in France" and "Made in Italy" products.
Last year, American consumers accounted for an impressive 24 percent of the global luxury market, with overall spending reaching $1.62 trillion, according to Bain & Company. However, industry insiders warn that this substantial contribution may soon be jeopardized. Euan Rellie, co-founder of investment bank BDA, which specializes in the fashion sector, reflects the sentiment shared by many: “The U.S. was supposed to be the savior of the luxury goods industry. Now, the administration has indicated a reluctance to maintain positive trade relations. Luxury is in a very tough spot.”
The luxury sector was already navigating challenges stemming from declining sales in China, a recession in Germany, and demographic shifts in Japan. The recent introduction of tariffs adds another layer of worry, prompting brands to hesitate in discussing potential impacts on pricing and accessibility.
Representatives from major luxury brands—including LVMH, Burberry, Chanel, Hermès, Kering, and Coach—have largely chosen to remain silent on the issue. LVMH, the world's largest luxury conglomerate, noted that the U.S. accounts for about 25 percent of its revenue. Despite the significance of American consumers, CEO Bernard Arnault attended events closely associated with the current administration, suggesting a complicated relationship between luxury brands and U.S. policy.
As this scenario unfolds, luxury brands seem to be bracing for a challenging period, where the cost and availability of their sought-after products may shift dramatically in the wake of these tariffs.
