Luxury Market Crashes: Trump Tariffs Spark Global Panic

How Trade Wars Are Crushing European Luxury Giants

The luxury goods sector, a $400 billion powerhouse, is reeling from a devastating blow as fears mount that President Donald Trump's sweeping tariff announcements could plunge the global economy into a recession. European luxury brands, once hopeful that affluent American consumers would bolster their faltering sales amid a weakening Chinese market, now face a grim reality. Analysts are slashing forecasts, with one Wall Street expert predicting a 2% drop in worldwide luxury goods sales for 2025, a stark reversal from an earlier 5% growth projection. This downturn, if realized, would mark the industry's most prolonged slump in over 20 years, driven by trade war chaos and plummeting stock markets.

Bernstein analyst Luca Solca pinpointed Trump’s April 2 tariff reveal, imposing hefty import taxes on key U.S. trading partners, as the catalyst for this bleak outlook. "Uncertainty and the relentless stock market rout are fueling a self-fulfilling prophecy: a global recession," he warned in a client note. The tariffs, broader and more aggressive than anticipated, have sparked retaliation from China, escalating into a full-blown trade war that has sent shockwaves through financial markets. Shares of industry titan LVMH have slipped 2% since January, while Gucci’s parent company Kering has cratered 31%. Even resilient players like Hermes and Richemont, owner of Cartier, have seen declines of 8% and 6%, respectively, despite their wealthier customer base. "The tariff turmoil has deepened consumer unease," said Mario Ortelli, managing partner at luxury advisory firm Ortelli & Co. "This is eroding the confidence of high-end shoppers."

Luxury Stocks Plummet Amid Tariff Fallout

The numbers paint a dire picture for European luxury giants as of April 8, 2025. LVMH, the sector’s bellwether, closed at $519.80, down sharply from $635.40 at the year’s start, a decline of 18.19%, far exceeding initial reports of a 2% drop. Kering, grappling with a Gucci overhaul, ended at $165.92, a 29.66% tumble from $235.85, aligning closely with the reported 31% fall. Hermes, often seen as a safe haven, dipped to $2,240.00 from $2,301.00, a modest 2.65% retreat, contradicting claims of an 8% loss. Meanwhile, Richemont bucked the trend slightly, edging up to $134.50 from $134.25, a 0.19% gain that clashes with the reported 6% decline. These discrepancies suggest intraday volatility or differing calculation baselines, but the overarching trend is undeniable: luxury stocks are under siege.

Investors are bracing for LVMH’s first-quarter earnings on April 15, a critical gauge of the sector’s health. European luxury houses like Louis Vuitton, Chanel, and Cartier had pinned their hopes on robust U.S. sales to counterbalance China’s faltering demand. At the dawn of 2025, optimism reigned with soaring stock markets, a strong dollar, and buoyant U.S. consumer sentiment. Yet cracks appeared even before Trump’s tariff bombshell, with Citi data revealing a 5% year-on-year drop in U.S. credit card spending on luxury brands in February and March, following two months of growth. Vontobel analysts had already flagged "luxury fatigue" and waning consumer confidence in early April, a warning amplified by the subsequent market chaos tied to equities, where much of America’s wealth is concentrated.

Pricing Power Under Pressure in a Trade War

European luxury brands face a daunting challenge: balancing pricing power with consumer sentiment in a tariff-ravaged market. With U.S. import taxes set at 20% for EU goods and 31% for Swiss products, companies like LVMH, Kering, and Richemont are expected to raise U.S. prices by roughly 6% to safeguard profits, per UBS estimates. Labels such as Gucci, Chanel, and Cartier already hiked prices by 5% to 6% in March, with Citi anticipating further single-digit increases soon. However, pushing prices higher risks alienating shoppers who, despite affording $10,000 handbags or gold bracelets, may recoil amid economic gloom. "Consumers are growing more cautious, scrutinizing every purchase," Ortelli noted, underscoring the delicate tightrope these brands must walk after steep pandemic-era price surges.

If prices remain static, the financial hit could be severe. Barclays projects a 1.5% earnings drop for LVMH’s core fashion and leather goods division, 2.4% for Prada and Hermes, a staggering 8.7% for Kering due to Gucci’s weakened pricing leverage, and 7.1% for Richemont, heavily exposed to the U.S. as the Swiss watch industry’s top market. In 2024, U.S. watch exports dwarfed China’s by over double, per the Federation of the Swiss Watch Industry, amplifying the stakes. During Trump’s first term, luxury largely dodged tariffs, but this time, the broader scope leaves little room for escape. Executives are banking on LVMH CEO Bernard Arnault, who mingled with Trump at his inauguration, to wield his influence for exemptions, recalling his January praise of U.S. optimism against France’s tax "cold shower." LVMH declined to comment on Arnault’s current stance.

First-Quarter Forecasts Signal a Slowdown

Sales reports for the first quarter ending March 31, 2025, are expected to reflect a sharp deceleration, with sector growth slowing to 0.5% from 3% late last year, per HSBC estimates predating the latest market dives. LVMH’s fashion and leather goods unit is forecast to post flat sales, per Visible Alpha consensus, while Moncler, reporting April 16, may eke out a 1.3% gain. Hermes, reporting April 17, is poised for a robust 10% rise, buoyed by its elite clientele, whereas Kering, on April 23, faces a nearly 10% drop as Gucci’s turnaround falters. Interpreting these figures will be tricky, with Jefferies analysts noting "a myriad of incremental unknowns" from recent turmoil, awaiting stability before revising projections.

Company	Start Price (Date)	End Price (Apr 8, 2025)	Percentage Change
LVMH	$635.40 (Jan 2, 2025)	$519.80	-18.19%
Kering	$235.85 (Jan 2, 2025)	$165.92	-29.66%
Hermes	$2,301.00 (Jan 2, 2025)	$2,240.00	-2.65%
Richemont	$134.25 (Jan 3, 2025)	$134.50	+0.19%

Navigating an Uncertain Future for Luxury Goods

The luxury goods industry stands at a crossroads as Trump’s tariffs reshape global trade dynamics. For European luxury brands, the U.S. market, once a lifeline, now teeters on the edge of retreat, while China’s retaliatory measures further cloud the horizon. Analysts and investors alike are grappling with a volatile landscape where consumer psychology, pricing strategies, and geopolitical maneuvers collide. The coming weeks, with earnings reports from LVMH, Moncler, Hermes, and Kering, will offer critical insights into whether these titans can weather the storm or if the $400 billion sector faces a deeper reckoning. For now, the outlook remains dark, with the specter of recession casting a long shadow over runways and balance sheets alike.

Key Citations

• Yahoo Finance LVMH Historical Prices
• Yahoo Finance Kering Historical Prices
• Yahoo Finance Hermes Historical Prices
• Yahoo Finance Richemont Historical Prices
• Reuters Global market rout darkens outlook for European luxury labels
• Investing.com European luxury stocks tumble as China imposes tariffs
• CNBC Trump tariffs live updates Markets plunge amid layoffs price hikes