What will happen to the prices of luxury handbags in the US? Pictured here is the Louis Vuitton store on 5th Avenue, New York City. Photo: AFP
A mere month ago, luxury businesses were looking forward to a new era of deregulation, lower taxes and a booming stock market – and dreaming of well-heeled buyers splurging on opulent ballgowns and statement watches.
Instead, as the Trump administration imposes 20% tariffs on products from the European Union (which has since been paused on April 9, and instead reverted to a 10% rate), they are bracing for a different reality.
One that may mean a US market with fewer quilted Chanel bags, more expensive Rolexes and uncertainty about the price tags attached to “Made in Italy”, “Made in France” and “Made in Switzerland” for consumers in the country.
The same consumers who, last year, were responsible for 24% of the total US$1.62tril (approximately RM7.29tril) global luxury spend, according to Bain & Co.
“The US was supposed to be the saviour of the luxury goods industry,” said Euan Rellie, co-founder of the investment bank BDA, which works in the fashion industry.
“The Trump administration has said overnight, ‘We’re not going to play ball.’ Luxury is in a very tough spot.”
It was already challenged, hurt by the slowdown of luxury sales in China, a recession in Germany and an ageing Japanese population.
Now, with the huge US market facing uncertainty, no brands seemed in the mood to discuss how tariffs might affect their businesses or the prices of their products.
A spokesperson for LVMH, the largest luxury group in the world, with over 75 brands including Dior, Louis Vuitton and Fendi, declined to comment – even though the US accounted for 25% of the group’s revenue in 2024, and Louis Vuitton is the sole European luxury brand to have factories in the US.
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To note, president Donald Trump cut the ribbon at a Louis Vuitton factory in Texas during his first term, and the LVMH chief executive, Bernard Arnault, attended the recent Trump inauguration with two of his children.
Burberry declined to comment, as did Chanel. There were no comments from Hermes, Kering (owner of Gucci, Balenciaga and Saint Laurent, among other brands) and Puig (Carolina Herrera, Rabanne and Dries Van Noten). Coach and Tory Burch, too, preferred to stay mum.
Doug Hand, a fashion lawyer who works primarily with independent US brands that source their materials from overseas, described his clients as “biting their nails and pulling their hair out”.
Andrew Rosen, an investor and adviser to independent US brands such as TWP, Veronica Beard and Alice & Olivia, said, “I don’t even know what the cost of our merchandise will be next week.”
Many luxury brands have big profit margins and can absorb some of the costs, or press their suppliers to reduce theirs, but analysts predicted that prices would go up – if tariffs stayed in place.
“Most people in their right mind are thinking they should just wait,” said Luca Solca, a senior analyst covering luxury at the research firm Bernstein.
“The volatility of US policy in the last two months has been wild. The president might change his mind, or he might cut a deal with the EU.”
Certainly, no one is planning to build upscale apparel and leather-goods factories in the US, one of the stated goals of the administration’s tariff policy.
“In every single conversation I have had with clients over the last five to 10 days, not a single person was talking about building a factory in the US,” said William Susman, a managing director at the investment bank Cascadia Capital, who has worked with Victoria Beckham and Tommy Hilfiger.
Asked if he was considering such a move, Brunello Cucinelli, the founder of his namesake brand, said he had no such plans.
“Made in Italy is at the core of our identity,” he said. “Our company is Italian, and we will continue to be based in Italy.”
Of course, if any consumer can absorb higher costs, it is the luxury consumer.
Conventional wisdom has it that even in a downturn, luxury is resilient; the rich, while less rich, are still comfortable enough to indulge their tastes for expensive goods.
In that sense, the prospects for luxury are better than those of mass-market brands that produce in Vietnam and Cambodia and have smaller profit margins while facing even higher tariffs.
Still, not all luxury consumers are the same, financially speaking. Achim Berg, the founder of Fashion Sights, a luxury industry think tank, said that about 70% of luxury buyers were “affluent and aspirational customers”, rather than the kind who didn’t mind whether the price of a US$750,000 (RM3.4mil) Lamborghini went up by US$100,000 (RM450,000).
Those customers, hit by both shrinking stock portfolios and fears of a recession, may opt against discretionary purchases such as handbags or diamond tennis bracelets.
People buy indulgences when they are feeling confident and optimistic, and the general environment now, Berg said, is one of “insecurity”.
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Tariff-related costs would come on top of years of luxury price increases.
Chanel bags, for instance, more than doubled in price between 2016 and 2023. And that could contribute to an already “negative perception”, of luxury brands, said Claudia D’Arpizio, the global head of the fashion and luxury practice at Bain & Co.
“They were already in a moment where they needed to recover customer trust, so this is not going in the right direction,” she said. “There is an overall negative feeling in society against products that are only for the superwealthy.”
Solca said it was possible that a grey market might develop in the US, much like the Daigou system in China, in which individuals buy luxury goods abroad, sneak them into the country and then resell them for a profit.
And there is one trend all the luxury analysts assume will re-emerge: “silent luxury”, the aesthetic of the 2008 recession, when consumers left stores with purchases in plain paper bags and visible logos fell out of favour.
“Even people who can still afford it might have luxury shame,” D’Arpizio said.
“They might not want to be so show-off, wearing something that is instantly recognisable.” – ©2025 The New York Times Company
This article originally appeared in The New York Times.
