Trump's tariffs are a big deal for fashion

The struggle for survival in the fashion industry has just become more difficult. On one hand, the crisis of Chinese spending has made the United States the most crucial market for luxury fashion, while the new tariffs proposed by President Trump threaten to reshape the fashion landscape for both global luxury giants and independent designers. Certainly, major fashion houses like Louis Vuitton, Gucci, and Hermès have the resources to navigate these and other economic turbulences, but independent brands face an uncertain future. These tariffs, aimed at goods from the European Union and potentially extending to Mexico, Canada, and other U.S. trading partners, could trigger a major upheaval in global trade, with significant repercussions on complex supply chains, consumer habits, and brand strategies. The main issue revolves around costs and prices: in other words, if shipping goods to America becomes more expensive, it is likely that European fashion will become more costly—which could pose a problem for brands that have artificially inflated their prices in recent years. From another perspective, independent brands that cannot rely on huge capital may see their sales decline in Europe while their production costs rise. But let’s proceed in order.

The classic luxury names are slightly more stable in the face of a generalized price increase because they rely on their prestige and a loyal clientele to offset the burden of tariffs. Axel Dumas, executive chairman of Hermès, told investors that in case of tariff hikes, «we will raise our prices accordingly.» Similarly, François-Henri Pinault, CEO of Kering, expressed confidence in his brands’ ability to adjust pricing strategies. However, analysts warn that years of significant price hikes have already tested consumers’ patience: Chanel’s iconic quilted bag has tripled in price since 2010, while Louis Vuitton’s Keepall has more than doubled, making further price hikes a risky move. According to UBS, as cited by BoF, aspirational consumers who have not already been priced out might hold back in the face of new increases. Meanwhile, Erwan Rambourg, an HSBC analyst, has spoken of «inflationary greed,» which is perhaps too refined a translation for the English term “greedflation,” a word that signifies the arbitrariness of price hikes, highlighting the risk that overly aggressive pricing strategies could alienate American customers, who are crucial for sales. In fact, recent data cited by BoF shows that price increases have slowed down: Dior kept its U.S. prices stable over the past year, while Louis Vuitton’s prices rose by just over 2%. Even Chanel, known for its significant hikes, slowed to a 5.4% increase.

For independent designers, the stakes are even higher. Unlike large groups, these brands rely on a few manufacturing partners and operate with much thinner margins. Stephanie Suberville Rodriguez, co-founder of Heirlome, which sources from Mexico, China, and Europe, told Vogue Business that she is quite concerned about the additional burden of tariffs: «We are taxing ourselves on materials that we do not produce domestically,» she said. For brands like Sloan, which operates with a hybrid model between direct sales and wholesale, absorbing extra costs without compromising profitability will be difficult. Julia Sloan, the brand’s founder, revealed to Vogue that suppliers have already announced imminent price hikes, forcing her into urgent consultations with logistics partners. The removal of the de minimis exemption, which currently allows duty-free entry for shipments under $800, represents another obstacle. Kara Yoo, a Canadian jewelry designer, expects a drop in direct U.S. sales if this rule is eliminated and plans to adopt a duty-paid delivery (DDP) model, ensuring pricing transparency but further reducing margins.

Despite all these complications, America remains a key market for fashion. Hermès plans to expand into U.S. cities like Phoenix and Nashville, effectively signaling its continued investment in the country. LVMH, led by Bernard Arnault, will likely increase production in the U.S. to mitigate the impact of tariffs: the group already operates three factories in the U.S., opened in 1990, 2011, and 2019, as well as jewelry workshops acquired through Tiffany & Co. The idea is that American customers may still appreciate a Made in USA product, although labor costs and quality control remain crucial issues. Pinault, on the other hand, has ruled out shifting production from Europe, emphasizing the importance of the "Made in Europe" label. For independent brands, adaptation will be necessary, especially if their primary market is the U.S. In any case, since tariffs could impact a third of imported goods—including clothing, footwear, and cosmetics—the entire sector must reconsider its strategies. According to Morningstar, tariffs between 10% and 20% could significantly reduce sales, particularly among aspirational consumers. UBS forecasts moderate luxury growth of 6% in the U.S. in 2025, driven by a strong dollar and robust stock markets, against a 1% decline in China. However, rising inflation and declining American consumer confidence dampen optimism. Only those who innovate, communicate transparently, and adapt swiftly will be able to navigate the turbulent waters ahead.