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Home Lifestyle Fashion

Will the US-EU Tariff Worsen the Luxury Slowdown?

July 29, 2025
in Fashion, News
Will the US-EU Tariff Worsen the Luxury Slowdown?
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Summary

  • A new US-EU trade deal imposes a 15% tariff on European goods, further straining the luxury fashion industry already facing a significant global slowdown and disappointing earnings reports from major groups like LVMH and Kering.
  • Luxury brands, including Louis Vuitton and Hermès, have raised prices to offset losses, though some, like Chanel, have rolled back hikes after sales dropped, as LVMH’s Bernard Arnault actively engages with US President Trump on trade.

On Sunday, US President Donald Trump and the European Union reached a trade deal, reducing Trump’s proposed 30% tariff to 15%. However, the agreement is a far cry from the zero-for-zero tariff deal the EU pushed for, and yet another strain on Europe’s luxury fashion industry.

Reeling from a year of disappointing earnings reported by major luxury groups, including LVMH, Kering, and others, the tariff will only increase pressure on the price hikes brands have relied on to subdue losses.

Analysis from RBC shows that luxury brands already increased prices by roughly 33% between 2019 and 2023 — an optimistic period that resulted in boosted revenues. However, since 2024, a slowdown in luxury spending has been facilitated by global economic uncertainty and shifting geopolitical relations.

By September 2024, the slowdown became apparent with Gucci, once Kering’s cash cow, seeing revenues drop 20% in H1 2024, and Louis Vuitton owner LVMH’s net profits falling 22% across all of its brands in the same period. This week, as H1 2025 results emerge, Kering reports that net profit dropped 46% — pointing to Gucci’s underperformance — and LVMH reports that net profit slid by 22%. The latest numbers indicate that luxury isn’t out of the woods yet, and things may get even harder.

Some brands, including Louis Vuitton, Chanel, and Hermès, upped prices on popular handbags this year to get ahead of economic woes. In April, Louis Vuitton’s Neverfull GM bag got a 4.8% price increase to $2,200 USD, and Hermes shared that it would offset the US’s proposed duties by increasing selling prices in the US by May 2025. However, premature price hikes are a tricky game to play.

Chanel’s ubiquitous quilted flap bag prices more than tripled between 2015 and 2025, according to Reuters. But by May this year, the French house, now helmed by Matthieu Blazy, rolled back its price increases after seeing sales drop for the first time since 2020, falling by 4.3%.

With the 15% tariff on European goods set to go into effect, brands may be forced to increase prices even more if they want to balance the costs. According to UBS, the tariff on exports to the United States could force luxury brands to hike prices by 2% in the United States, or around 1% globally. Otherwise, brands face a potential 3% impact on earnings before interest and tax.

Of all the luxury leaders, LVMH Chief Bernard Arnault has contributed the most to conversations with Trump. In an interview with the Wall Street Journal last week, Arnault shared, “I’m pushing as much as I can for us to reach an agreement with the Americans, so that we don’t get caught up in a trade war, which would be extremely damaging for European businesses.”

The executive has spent recent weeks “trying to persuade the key European countries like Italy, Germany, France, and Europe as a whole,” pushing for leaders like Italian Prime Minister Giorgia Meloni and German Chancellor Friedrich Merz to reach a deal with the US President.

Currently the 5th richest man in the world, Arnault has been strategic about maintaining close ties with Trump, among the first business execs to visit the President at Trump Tower following the 2016 election, and also sitting front row at his 2025 inauguration.

During Trump’s first term in 2019, Arnault opened a Louis Vuitton factory in Texas — and just last Thursday, he promised another Texas facility, appeasing the President’s hopes for increasing the US’s production. However, the first factory has already become the center of another controversy, following a Reuters investigation that revealed severe underperformance due to poor staff training, retention, and output.

LVMH’s ambitious response to both the luxury slowdown and shifting trade relations perhaps offers a cautionary tale for other groups and fashion houses. Increasingly, placing itself at the center of contentious geopolitical negotiations is a risky role to play for a luxury group centered on Old World authenticity and brand magic.

Additionally, LVMH has shaken up its creative strategy, selling Off-White to Bluestar Alliance last year, and now considering a potential sale of Marc Jacobs for roughly $1B USD. Elsewhere, the group has engaged in an industry-wide Creative Director shake-up in hopes of refreshing interest, moving Jonathan Anderson to Dior, bringing Proenza Schouler’s founders into Loewe, and Michael Rider at Celine.

Industry leaders are watching closely, as Arnault’s efforts offer a case for other execs hoping to protect their brands. Will other European fashion purveyors like Prada Group, Kering, and OTB Group follow suit? From price increases to on-shoring production and creative upheaval tactics, luxury’s playbook for navigating crises is becoming increasingly convoluted.

Success may come down to those who can balance their ambitions to reach short-term financial targets with a commitment to long-term consumer trust and brand authenticity.

The post Will the US-EU Tariff Worsen the Luxury Slowdown? appeared first on Hypebeast.

Tags: Bernard ArnaultchanelEuropean UnionGucciHermesKeringLouis VuittonLVMHPrada GroupSee MoreTariffsTrump
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