Customers will carry items from Hermes Store on February 14th, 2025.
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While European beloved luxury brands may largely be protected from the initial effects of wiping out US tariffs, the risk of a wider economic downturn is bad news about the sector’s long-awaited recovery.
European luxury stock stocks LVMH, Richmont, Kering and Hermes Some of those who lowered Wednesday as collections of US imports from the European Union took hold. Even if President Trump later announced a 90-day suspension and announced that he had reduced interest rates to a universal 10% tariff, the outlook remains unclear.
High-end fashion houses are less likely than other companies to succumb to President Donald Trump’s ultimate demand to move manufacturing to the US, as the European label is part of its appeal, indicating that they will instead pass an increased cost of imports to consumers.
But analysts warn that the wider recession in the global economy can make those hikes difficult, even for wealthy shoppers who can usually better absorb price shocks.
Following Trump’s “liberation day” tariff announcement, the odds for the US and global recession this year rose to 60%, according to JPMorgan.
“We believe that the global stock market is weak and wider economic uncertainty is heavy on confidence, and this further postpones the gorgeous demand recovery,” Adam Cochrane, general retail and luxury equity research analyst at Deutsche Bank, wrote in a memo Wednesday.
Luca Solca, a senior analyst for global luxury goods at Bernstein, repeatedly recites the sentiment, calling the first round effect of US tariffs “negligible,” but cites the notable knock-on effect.
“What we need to worry about is the impact of the second and third levels of new American policies. If they promote a sharp global recession and stock market correction,” Solka wrote in a note last week.
Bernstein estimates that luxury European companies generate a relatively minimal 15% to 30% of sales from across the US, a relatively minimal 15% to 30%. Nevertheless, the US market has been a key growth driver in recent quarters as companies have changed focus amid declining sales in China. Meanwhile, China’s already-controlled demand could further clash with US tariffs 125% on Wednesday.
This was the fourth quarter results as high-end fashion groups were referring to sector shifts, which suffered from post-Covid slowdowns and soft consumer spending. However, Deutsche Bank said Wednesday that the rebound was “an unusual and not a trend.”
“It is no longer clear that 3Q24 is the lowest point of luxury demand,” Cochrane wrote, saying the banks have reduced their luxury sector growth expectations for 2025 by 3 percentage points on a constant currency basis to 2%.
City wrote on Tuesday that the “terrifying” U.S. tariff announcements and strong market sales represent “a serious threat to the future of U.S. luxury demand.”
Analysts say some of the best brands to survive the storm are Hermes and Burberry Meanwhile, Richmont and others Monkler It could be a huge hit.
