Trump's tariffs crush luxury goods market "recovery hopes"

Since the beginning of this year, driven by the U.S. market, analysts generally expect a wave of recovery in the luxury goods market. However, this expectation has been completely shattered since Trump launched the trade war, and the new round of tariff threats will suppress demand for high-end handbags and luxury watches.

Analysts have significantly lowered growth forecasts for the entire industry. Bernstein predicted this week that due to rising economic uncertainty and the increasing likelihood of a global recession, the luxury goods industry's revenue will decline by 2% in 2025, in stark contrast to the previously forecasted growth of 5%. An industry banker stated:

Our baseline forecast now is that any warming in the luxury goods industry will be delayed until 2026.

The damage has been done, recovery may be a delusion

According to CCTV News, on April 2 local time, the White House issued a statement saying that Trump would impose a 10% "baseline tariff" on all countries and higher "reciprocal tariffs" on countries with the largest trade deficits with the U.S., which triggered a sharp decline in U.S. stock indices. This policy has already caused global market tremors, and although Trump announced a 90-day delay on some "reciprocal tariffs" last Wednesday, analysts believe the damage has been done.

Bernstein analyst Luca Solca insists on lowering the forecast for the entire luxury goods industry in 2025, stating:

Restoring data to previous levels, as if everything that happened was just a nightmare, is impossible. We have already seen substantial damage caused by unstable policy announcements in the financial markets and the economy.

Uncertainty reigns supreme, which is often an excellent backdrop for recession.

Luxury goods earnings season is about to begin, market expectations are pessimistic

French luxury giant LVMH will kick off the luxury goods earnings season on Monday. The group's billionaire owner, Bernard Arnault, flew to Washington at the end of March to discuss potential tariff issues with Trump.

Barclays expects LVMH's core fashion and leather goods division to see organic sales decline by 1% in the first quarter, with total group sales expected to remain flat compared to the same period last year.

Chanel's fashion president Bruno Pavlovsky told the Financial Times last month:

If you look at the stock market performance, you can basically predict the business level of our boutiques.

Kering may continue to be dragged down by Gucci, with Barclays expecting Gucci's sales to decline by 25% in the first quarter, while Bernstein warns that Kering is "extremely unlikely" to achieve its guidance of flat revenue and operating profit for 2025 In this storm, not all brands are impacted equally. Hermès, known for its highly sought-after Birkin bags, is expected to continue performing well. Barclays analysts estimate that its sales in the first quarter will grow by 8%.

Psychological Impact May Exceed Tariffs Themselves

While the impact of tariffs on luxury goods companies is more manageable than in many other industries, and strong brands can mitigate the effects by raising prices, in this consumer confidence-dependent industry, the deeper harm is psychological.

Erwan Rambourg, Managing Director at HSBC, believes that the risks facing luxury goods stem from the combined effects of wealth shrinkage, limited purchasing power of American consumers, and a general deterioration in consumer sentiment. In a report, he wrote:

We expect the number of celebrations with champagne this year to be significantly reduced.

HSBC now expects organic sales in the luxury goods industry to remain flat in 2025, in stark contrast to previous expectations of a 5% growth compared to 2024