Tariffs are making waves throughout the market, with executives at luxury goods brands and mass-market retail companies, alike, addressing the impact that the Trump Administration’s trade policy is having on their operations. LVMH chairman and CEO Bernard Arnault said in connection with the group’s Q1 results this month that the year “started well but worsened from March due to economic turmoil linked to tariffs.” Hermès recently revealed that it will raise prices in the U.S. in order to offset the impact of a 10% import duty on European goods, and rival Kering’s chief financial officer Armelle Poulou said that the group as “the capacity to protect our margins via price increases.”
Looking beyond just luxury, tariffs have “a ripple effect across supply chains, cost structures, and ultimately, pricing strategies,” AlixPartners stated in a recent note. “While many companies instinctively seek to pass through increased costs to consumers, this tactic is increasingly fraught in today’s economic climate.” The financial advisory and global consulting firm asserts that in categories where lower cost, imported goods dominate, “tariffs can drive up baseline costs, not only for individual companies, but for entire industries, making it more expensive to produce and sell the same products.”
At the same time, macroeconomic factors, such as elevated inflation, fluctuating interest rates, and declining consumer confidence, are pressuring household budgets. AlixPartners’ analysts suggest that discretionary spending – on categories like travel, gifting, shopping, and savings – could decline by 15–25% during downturns.
“Consumers are not just cutting back; they are reprioritizing.”
> Impact on Fashion & Beauty: The clothing and footwear sector is expected to face the brunt of new trade tariffs, with U.S.-imposed duties on Chinese-made goods soaring to 145%. Since China is the leading supplier of apparel to the U.S., brands that rely heavily on Chinese manufacturing and count the U.S. as a major market are expected to suffer significant impacts. Other key manufacturing hubs like Vietnam, Bangladesh, India, and Turkey are also feeling the strain, with tariffs of 46%, 37%, 27%, and 10%, respectively. If these tariff levels persist, brands will face soaring production costs, forcing price hikes and severely squeezing profit margins.
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