Trump’s Tariffs Shake Luxury Sector: Louis Vuitton, Gucci, and Hermès Face Price Hikes and Market Slump

The recent tariff policy pushed by U.S. President Donald Trump has sparked a storm in the luxury sector, impacting giants like Louis Vuitton, Gucci, and Hermès. The tariffs, which include up to a 20% levy on European products and up to 145% on Chinese goods, are reshaping luxury brands’ strategies in a market already weakened by the global economic slowdown. This impact, combined with declining demand in key markets like China and the U.S., threatens an industry reliant on consumer confidence and exclusivity.

According to a Bain & Company report, the global personal luxury goods market faces a projected 2% decline in 2025, the first since the 2008 financial crisis, exacerbated by Trump’s tariffs. The U.S., accounting for about 24% of global luxury spending, is a cornerstone for brands like Louis Vuitton, part of the LVMH conglomerate, which generates a quarter of its revenue there. Tariffs have raised import costs, forcing brands to choose between absorbing losses or passing them onto consumers through price hikes.

Louis Vuitton has already increased the price of its iconic handbag in response to these measures, potentially alienating aspirational customers, especially Gen Z, who are already hesitant toward less innovative products. LVMH, led by Bernard Arnault, has been hit hard. After reporting a 4% drop in first-quarter 2025 revenue, the group’s shares plummeted 35% on the Paris Stock Exchange.

Arnault, who attended Trump’s inauguration and maintains a close relationship with the president, expressed concern over the lack of trade agreements between the EU and the U.S., warning that “the impact will be severe if Brussels doesn’t act wisely.” However, LVMH has an advantage: its factories in Texas and California, opened during Trump’s first term, could mitigate some impact by producing locally, though imported raw materials remain affected.

Other brands, like Gucci (part of Kering) and Hermès, face similar challenges. Kering could see an 8.7% revenue drop, while the Swiss watchmaking sector, represented by Richemont, anticipates a 7.1% decline.

Brands like Luis Vuitton are feeling the impact of Trump's tariffs. Source: YouTube.

A strategy that isn’t viable

Relocating production to the U.S. isn’t a short-term option for many firms, which rely on European craftsmanship to maintain their exclusive aura. Additionally, the trade war with China, imposing 125% tariffs on U.S. products, further complicates matters, as many brands partially manufacture in China—a fact exposed on social media by Chinese manufacturers revealing the low actual production costs of luxury handbags, damaging the perception of exclusivity.

The psychological impact on consumers is another critical factor. Economic uncertainty and higher prices erode confidence, particularly among younger buyers, according to Bernstein’s analysis. Brands like Louis Vuitton and Chanel, which have raised prices to offset tariffs, risk losing customers who value experience and innovation over status. Meanwhile, smaller emerging brands like Prada’s Miu Miu are gaining ground by offering fresh, accessible products.

Despite the challenges, luxury brands have options. Diversifying into Asian markets or investing in local production are potential strategies. However, much of the damage is already done due to the uncertainty created by Trump’s policies. The luxury sector, a symbol of resilience, faces a 2025 full of hurdles, but its ability to adapt will be key to regaining its shine.