U.S. President Donald Trump's tariff policy has put the global luxury goods industry on high alert. The luxury market is already struggling due to economic recession and a decline in consumer spending, and Trump's announcement to impose a 20% tariff on products from the European Union (EU) and a 31% tariff on Swiss products raises the possibility of additional damage.
According to relevant industry sources on the 15th, the U.S. is one of the key consumer markets, accounting for about 25% to 30% of the global luxury goods market. Most products from major brands such as Louis Vuitton, Gucci, and Chanel are produced in Europe, including France and Italy.
After President Trump announced mutual tariff measures, luxury companies' stock prices plummeted. Although Trump declared a 90-day suspension of the mutual tariffs on the 9th, just a week after the announcement, luxury companies' stock prices have failed to recover to previous levels and remain unstable.
On the French stock market, the stock price of Louis Vuitton Moët Hennessy (LVMH) fell by 7.8% from 575.2 euros on the 2nd to 530.1 euros the previous day. LVMH is a group that owns major luxury brands such as Louis Vuitton, Dior, and Celine. The stock price of Richemont Group, listed on the Swiss stock market, fell by 11.2% from 154.3 Swiss francs (CHF) on the 2nd to 137 Swiss francs the previous day. Richemont Group oversees top jewelry and watch brands, including Cartier, Van Cleef & Arpels, and IWC.
Bruno Pavlovsky, president of Chanel's fashion division, noted in an interview with the Financial Times (FT) last month that "monitoring how the stock market behaves allows us to predict the business levels of our stores." A drop in stock prices suggests poor sales performance.
Investment bank Bernstein revised its projection for luxury industry sales growth this year from 5% to a 2% decline. In particular, it expects a 25% drop in revenues for Kering Group, which owns Gucci, in the first quarter.
For LVMH, the fashion and leather sector, which accounts for nearly half of the group's revenue, is projected to decrease by 1% in the first quarter, with recent financial reports indicating that it fell short of financial sector forecasts. The first-quarter revenue for the fashion and leather sector was 10.1 billion euros (approximately 16.3 trillion won), which is a 5% decrease compared to the same period last year. Total group revenue, including watches and jewelry, perfumes and cosmetics, and alcohol, stood at 20.3 billion euros (approximately 33 trillion won), a 3% decline from the same period the previous year.
Industry insiders believe that luxury brands are likely to pass on the tariff burden to consumer price increases. An industry source said, "Brands that have maintained solid performance despite the luxury market downturn and consumer contraction are in a favorable position to pass on the price increase due to tariffs to consumers, as they have strong brands. This is because they can alleviate the effects of tariffs through price increases."
Citigroup, in a report released on the 3rd, forecasted that "most luxury brands will initiate single-digit price increases in the U.S. within the coming weeks to partially mitigate the tariff shock." François-Henri Pinault, chairman and CEO of Kering Group, stated, "If tariffs are imposed on our brands such as Gucci, Balenciaga, and Saint Laurent, we will review our pricing strategy."
Typically, when headquarters raise prices, prices increase globally, which means the Korean market cannot avoid being influenced. An industry insider said, "Some luxury brands increase prices one to two times a year while using the term 'adjustment' instead of 'increase'" and added, "When headquarters raise prices, we have no choice but to align prices accordingly in Korea." This insider also noted, "If the headquarters' price increase is significant due to tariffs, domestic consumers will also be affected."
There's a growing outlook that the recovery of demand in the luxury market will be delayed until after 2026. This is attributed to the expectation that luxury brands will face a tough period for the time being unless the uncertainty surrounding tariff policies is resolved. In fact, it's reported that on the 10th, Prada acquired Versace for 1.25 billion euros (approximately 2.3 trillion won), and the price reportedly dropped in the final stages due to market turmoil caused by mutual tariffs. It was originally expected to be sold for $1.6 billion (approximately 2.29 trillion won).
LVMH previously managed to avoid significant tariff impacts by expanding local production in the U.S. during Trump's first term. It is reported that the company is currently considering increasing production in the U.S. An industry insider stated, "In the short term, there is a strong possibility of responding through price increases, but in the long term, they will inevitably seek structural changes such as diversifying production bases."