July 6th saw the U.S. place tariffs on $34 billion of Chinese goods, kicking the trade war between the world’s biggest economies into top gear. But what does this mean for the luxury industry; from fashion addicts to executives to market analysts, how will people be affected?

Here’s a rundown of how the escalating trade war may impact upon the luxury market:

  • Luxury automobiles: Companies such as BMW, Ford and Tesla may see their decades of lobbying efforts in China for easier access to the market undone by the trade war. Price hikes have already resulted, leading to consumers holding back on their next purchases.

 

  • Discounted handbags: Due to the recent cuts on import duties and VAT, Louis Vuitton decided to reduce prices on a wide range of items in order to back the government’s efforts to reduce the price premium for luxury goods sold in China and overseas.

 

  • Fashion is braced for impact: The trade war’s tariffs may trigger relocation of Chinese textile factories to other Asian countries. Beijing’s retaliatory tariffs on US cotton may cause outsourcing of textile manufacturing to South and Southeast Asia. Chinese businesses are preparing for possible US tariffs on finished products if the trade war progresses.

 

  • Luxury travel: Airbus Chief Executive Tom Enders warned CNBC that an escalation of the trade war may trigger retaliation from China that would ultimately affect air traffic.

 

  • Duty-free benefits?: Dufry AG, the world’s largest duty-free retailer, would thrive in a more restrictive trade environment! CEO Julian Diaz reported that this is because tax-free airport shops would gain a bigger price advantage over other retailers if governments impose new duties on imports.

 

  • A tipple for Tiffany?: As a company that exports U.S.-made goods to China, Tiffany & Co. may have reason to celebrate. Tiffany stands to be a prime beneficiary of a reduction in import tariffs on gold/silver jewelry (from 20 percent to 8 percent) and platinum/gemstone jewelry (from 35 percent to 10 percent).
Leave a Reply

Your email address will not be published. Required fields are marked *