Tariffs targeting luxury houses
European Business Magazine reports that new U.S. tariffs tied to the Trump administration are creating exposure for European luxury groups named in the story — LVMH, Kering and Richemont — at a moment when U.S. consumers were a key growth source. (europeanbusinessmagazine.com)
New United States tariffs on European Union goods have put Europe’s biggest luxury groups in a bind just as wealthy Americans had become their most dependable customers. (europarl.europa.eu) President Donald Trump announced the new tariff package on April 2, 2025, with a 10 percent baseline tariff on imports and a higher 20 percent rate for most European Union goods due to start on April 9. He then paused the full European Union rate for 90 days and kept the bloc at the 10 percent baseline instead. (europarl.europa.eu) That matters for groups such as LVMH Moët Hennessy Louis Vuitton, Kering and Compagnie Financière Richemont because they sell handbags, jewelry and watches made in Europe into the United States market. Reuters reported in February 2025 that Louis Vuitton and Gucci were counting on a buoyant United States market while China lagged. (ajot.com) Luxury companies can often raise prices faster than mass-market brands, and executives said they were prepared to do that if duties rose. Hermès Executive Chairman Axel Dumas said in February 2025, “If duties increase, we’ll increase our prices accordingly,” while Kering Chief Executive François-Henri Pinault said the group would review pricing. (ajot.com) The problem is that luxury brands had already spent years lifting prices. Reuters reported that Chanel’s classic flap bag had more than tripled in price since 2010, while the Lady Dior bag and Louis Vuitton Keepall had more than doubled, leaving less room for another round of increases. (ajot.com) By early April 2025, analysts were warning that the bigger risk was not the tariff itself but a broader hit to confidence, stocks and spending by affluent shoppers. Bernstein cut its luxury industry forecast to a decline of as much as 2 percent for 2025 from an earlier expectation of 5 percent growth. (money.usnews.com) The United States had become more important because China was no longer carrying the sector. CNBC reported that European luxury groups generated about 15 percent to 30 percent of sales from the Americas, and that the United States had become a key growth driver as China sales weakened. (cnbc.com) LVMH’s own numbers showed that exposure clearly. The company said on January 28, 2025, that its 2024 revenue reached 84.7 billion euros, with growth in both Europe and the United States, and AFP reported in April 2025 that roughly a quarter of LVMH revenue came from the United States. (lvmh.com; france24.com) Kering entered the tariff fight from a weaker position. The group reported 17.2 billion euros in 2024 revenue on February 10, 2025, down 12 percent, and Gucci revenue fell 23 percent, though Kering said North America showed a slight sequential improvement in the fourth quarter. (kering.com) Richemont was holding up better than many peers before the tariff shock. The Cartier owner reported on May 16, 2025, that sales for the year ended March 31, 2025, rose 4 percent to 21.4 billion euros, led by jewelry. (richemont.com) LVMH’s first-quarter update showed how quickly the mood changed after the tariff announcement. The group said sales fell 2 percent to 20.3 billion euros in the first quarter of 2025, and Chief Financial Officer Cécile Cabanis said the company could increase United States production of Louis Vuitton and Tiffany goods while also considering price increases. (france24.com) The tariff threat left luxury groups choosing between three imperfect options: charge more, absorb lower margins, or shift more production closer to American buyers. For brands that sell European craftsmanship as part of the product, none of those choices is simple. (cnbc.com; france24.com)
