Geopolitics and Luxury: The Consequences of a Possible Trump Re-election

On the eve of the American presidential election, a cloud of uncertainty looms over the business world and the luxury industry: Will Donald Trump emerge victorious? His unpredictable nature and the radicalization of his positions since his last presidency are cause for concern, especially for the business world and the luxury industry, which highly values stability and continuity.

By the end of 2024, the United States will still be the largest global market for luxury goods. According to data reported by Bain & Company, this market still accounts for 111 billion euros in revenue, despite an 8% slowdown last year, mainly due to inflation. In this context, it is easy to understand why a Trump re-election worries major international brands. However, during his first term, Trump initially had a brief positive effect on the markets. But the enthusiasm for him quickly faded in the face of a series of super-protectionist measures and the radical nature of his positions. How can an industry that increasingly promotes inclusivity reconcile with Donald Trump's often contrary opinions?

If his vision of limiting the importation of goods by taxing foreign products remains, this intention was partially hampered by the geopolitical situation. It was necessary to maintain good relations with China in order to avert the danger posed by Kim Jong-un in North Korea. Today, the situation with Taiwan is worrisome. For diplomatic reasons, the new president would again be limited in enforcing a harsh trade policy towards China. For diplomatic reasons, the new president would once again find himself limited in the application of a trade policy that is too hard on China. The American-made brands stand to be most affected by the 'Trump effect'. During his first term, luxury car manufacturer Cadillac aired a commercial stating that while the former President admired their cars, Cadillac did not share his values.

The Trump effect is likely to negatively impact the image of American brands, particularly among younger consumers who are increasingly concerned about ethics and corporate commitment.

Furthermore, if Trump is re-elected, the US might face another wave of inflation due to the looser monetary policy advocated by the Republican candidate. But what about the stock markets? Historically, they have always responded to a Republican victory with a positive rebound: during Trump’s first presidency, the Dow Jones index rose by 56%. His return to the White House would likely be followed by the implementation of a generous fiscal policy, especially for businesses. However, this enthusiasm would be short-lived. Trump’s main problem is geopolitical.

As aptly summarized by The Economist, a Trump re-election would provide Vladimir Putin and Xi Jinping with an opportunity to highlight the perceived dysfunction of American democracy further, potentially exacerbating current sensitive issues such as the tensions in Taiwan or the war in Ukraine.

His renewed appointment to power would indicate that the people have elected him, knowing what he's capable of…