Luxury sector reels as LVMH, Hermès, and other major players see share prices drop amid concerns over U.S. trade exposure and limited production alternatives.
PARIS, May 24 (Reuters) – European luxury stocks tumbled on Friday following an unexpected announcement by U.S. President Donald Trump, who said he would impose a sweeping 50% tariff on European Union goods starting June 1.
The announcement sent shockwaves through Europe’s luxury sector, which includes global icons like LVMH, Hermès, Kering, Prada, and Burberry. Shares in LVMH (LVMH.PA) fell by about 3%, while Hermès (HRMS.PA) dropped 4%, reflecting widespread anxiety in an industry heavily dependent on American consumers.
The U.S. market has been a bright spot for European luxury brands this year, especially as Chinese demand has cooled. The looming tariff threatens that lifeline: around a quarter of luxury goods from Europe are sold to American consumers, with some smaller brands even more exposed. For instance, outerwear specialist Moncler has 14% of its sales in the U.S., while sandal maker Birkenstock’s exposure is as high as 46%.
S&P analysts recently flagged luxury goods as one of the most vulnerable sectors to U.S. tariffs, given the limited ability of brands to shift production to the U.S. Bain partner Claudia D’Arpizio underscored this challenge at an industry event, saying, “If you want to create a factory in the U.S. to overcome the problem of the tariffs, it’s just impossible right now… you don’t have the people, the know-how.”
Currently, Louis Vuitton—part of LVMH—is the only major European luxury brand producing within the United States, though it has faced challenges at one of its sites, according to Reuters.
Analysts believe luxury brands will have to lean on pricing power to absorb the impact of these tariffs. However, some companies may have limited ability to increase prices further without alienating customers. “We therefore believe that pricing will likely be the luxury goods industry’s main way of mitigating tariffs,” S&P noted in a report.
France, home to the world’s largest luxury industry, employs over 600,000 people in the sector, according to data from the economy ministry. Italy, another luxury heavyweight, sees fashion account for over 5% of its GDP, driven by high-end leather goods and accessories.
The two countries are the biggest European exporters of luxury goods to the U.S. In 2024 alone, France shipped 890 million euros ($1 billion) worth of sparkling wine, including champagne, and 1.27 billion euros in grape brandy—mostly cognac—to American shores, according to United Nations data. Italy exported 770 million euros of leather handbags.
With the tariff set to take effect in just days, luxury brands are bracing for a potentially steep price to pay in their most lucrative overseas market.