Trump's tariffs throw cold water on European luxury goods

The European luxury goods industry is facing a major challenge as US President Donald Trump threatens to impose new tariffs on imports from the European Union (EU).

View of the Louis Vuitton store at Galleria Vittorio Emanuele II in Milan, Italy - Photo: REUTERS

According to Le Monde newspaper on March 7, US President Donald Trump's imposition of a 25% tax on European goods imported into the US has caused many concerns for the French luxury goods industry, especially cosmetics, fashion and leather goods brands.

America is the "promised land" of luxury goods

After Mr Trump took office and pledged to tax all "foreign countries", businesses in the French fashion and cosmetics industry felt a "drenched shower of cold water", an expert said.

The US is the “promised land” for luxury brands, accounting for 80 billion euros of the 363 billion euros in global sales by 2024, according to Joëlle de Montgolfier, associate director at Bain & Company.

In 2024, France exported 1.8 billion euros of women's clothing, 2.8 billion euros of cosmetics and more than 1 billion euros of handbags to the US market.

French businesses are heavily dependent on this market, especially after sales in China fell 22% in the same year.

By the end of 2024, the US luxury market is still showing signs of positive recovery after a period of gloom.

This gives hope to many brands, especially LVMH, the world's largest luxury group. CEO Bernard Arnault said the US is an important market to offset the loss of China, which is expected to take at least two years to recover.

However, with Trump's new tax policy, the French luxury goods industry is facing a major challenge. Some businesses have responded, while large corporations are still cautiously waiting for the next developments.

Luxury brands struggle to cope

A woman walks past a Hermes store in Paris, France on February 14 - Photo: REUTERS

Faced with tariff pressure, some brands are speeding up exports to avoid the tax. Horace, a French men’s cosmetics brand, began shipping to the US in March, although it took three months, in hopes of avoiding the new tariffs.

For luxury goods, the impact is more serious. François-Marie Grau, representative of the French Women's Fashion Federation, warned that sudden import tariffs could have serious economic consequences.

Brands have three options: cut profits, raise prices or adjust production. LVMH and L'Oréal could expand production in the US, while Kering is determined to keep "Made in Europe".

Luxury associations are lobbying the EU to avoid retaliatory tariffs, to prevent the risk of French goods being taxed in the US.

Taxes increase but product prices cannot be increased to compensate

Raising prices to offset tariffs may not be effective, especially when luxury brands have been adjusting prices aggressively over the past decade.

Since 2010, the price of Chanel, Lady Dior and Louis Vuitton Keepall bags has at least doubled. Financial experts warn that if this trend continues, brands risk losing the wealthy middle-class customers who buy luxury goods to assert their position.

HSBC believes that this group of customers is susceptible to "greedflation" (excessive price increases for profit), which can turn them away from the brand.

Faced with such pressure, fashion brands are becoming more cautious in their pricing policies. In 2024, Dior will maintain its prices in the US, Louis Vuitton will increase by just over 2%, and Chanel will increase by 5.4% - significantly lower than in previous years.

Source: https://tuoitre.vn/thue-quan-cua-ong-trump-tat-gao-nuoc-lanh-len-hang-xa-xi-chau-au-20250309134220837.htm