What: French luxury sector faces margin pressure as US implements 15% tariffs on European exports from August 1st, amid global market slowdown and Chinese consumption decline.

Why it is important: The situation exemplifies how geopolitical tensions and trade policies can significantly impact the luxury sector, especially as brands struggle to maintain margins without alienating price-sensitive consumers.

The French luxury industry confronts a significant challenge as the United States prepares to implement 15% tariffs on European exports starting August 1st. This comes at a particularly challenging time, with global luxury sales projected to decline between 2% and 5% in 2025. The US market, representing approximately 80 billion euros of the global 363-billion-euro luxury market, remains crucial for French manufacturers, who exported 8% of their women's ready-to-wear, 13% of handbags, and 13% of cosmetics to the US in 2024. Major luxury groups are exploring various strategies to absorb these additional costs, with Hermès announcing price increases while LVMH plans "moderate" adjustments in fashion and leather goods. The situation is particularly complex as the industry faces criticism for previous aggressive price hikes, which saw some items double in cost between 2019 and 2023. Manufacturers may need to review production costs and supplier relationships, though reducing product quality remains a sensitive consideration.

IADS Notes:

The impact of US tariffs adds to existing challenges in the luxury sector. As reported in June 2025, the industry was already experiencing a significant transformation, with Bain & Company projecting a decline of up to 5% in global sales. This comes as the sector grapples with the loss of approximately 50 million consumers over two years, as noted in April 2025. The timing is particularly challenging as brands pivot towards the US market to offset an 18-20% decline in Chinese consumption reported in January 2025, demonstrating how geopolitical and trade tensions can compound existing market pressures.

US tariffs: From LVMH to L'Oréal, the French luxury sector is worried about its margins