Luxury: Measures to Counter US Tariffs

Donald Trump has rewritten world trade rules, ushering in a new era in which protectionism reigns supreme. What will the consequences be for brands that, until now, have considered the US market a solid windfall?

It should be remembered that the United States imports 98% of its clothing and 99% of its shoes. In 2023, according to the latest data available from ExportUSA, Americans spent 175 billion on clothing and accessories. Fashion will, therefore, undoubtedly be one of the sectors most affected.

Analysts at the Swiss bank UBS are already predicting an increase in prices for luxury brands. The most established companies, such as Hermès, Louis Vuitton and Chanel, which are able to attract a particularly wealthy clientele, will be able to cope quickly with a rise in prices.

These companies increase their prices regularly, more or less every year, and their desirability could even grow, boosted by a more pronounced exclusivity.

However, many European luxury brands that derive a large proportion of their sales from the United States will still be strongly impacted; these include Brunello Cucinelli, which derives 34% of its turnover from the US, and Ferragamo, which derives 31% of its revenue from the US market. As for the luxury giants Kering, LVMH, and Richemont, whose share of sales in the United States amounts to 24%, 25% and 20%, respectively, they need to come up with a response strategy.

LVMH can consider developing its existing workshops on American soil and rely on the state subsidies in force in the US. However, this could have an impact on employment and weaken the European subcontracting sector, already affected by the decline in demand for luxury goods.

One of the most vulnerable sectors is wine, which is essentially a local product. For LVMH alone, most of its prestige and grand cru champagnes production is based in France. In Italy, Federvini, the main producers' union, estimates the immediate damage suffered by this sector, which alone represents 2 billion euros in exports, at between 400 and 450 million euros.

Faced with this situation, Foreign Minister Antonio Tajani and Prime Minister Giorgia Meloni have called on Europe to exercise caution and not to overreact to a trade war. At the same time, they suggested that major Italian groups, including prestigious fashion houses, look elsewhere by strengthening commercial relationships with other partners, particularly India, Mexico, Brazil, the United Arab Emirates and Saudi Arabia.