By Ricardo Lezama 
It’s not just consumers of cheap items manufactured in China being impacted. Entire networks of luxury goods rebranded with legacy monickers are being rocked.
As many probably know now, luxury items are mostly assembled in China. Consequently, French luxury giant LVMH is feeling the sting of newly implemented tariffs, which are reverberating across its business operations and financial performance. The French luxury brand maker appears more inclined to blame the European Union than Trump. In a call with investors, Bernard Arnault, chairman and CEO, mentioned the following:
“Europe is not run by a political power but by a bureaucratic power that spends its time issuing regulations that are unfortunately imposed on all member states and that penalize our business sectors,” which is somewhat peculiar given the tariffs that most impact him are China to US transactions.
Arnault, the ever pragmatic Frenchmen, praised supposed economic optimism in the United States in a post Trump election victory. The irony is not lost on us – LVMH actually shrank in value due to direct impacts from tariffs. Hermes is now jockeying for position as the most valuable French company.
Nevertheless, he may hedging his comments to accommodate his support for Trump in a bid to gain an exemption as his investor and employee base seek guidance.
Already, we see problems like revenue decline. In the first quarter of 2025, LVMH reported a 2% drop in revenue, bringing in €20.3 billion ($23 billion). The fashion and leather goods division—its most profitable segment—saw a 4% decline, signaling early signs of market softening. Investor sentiment has taken a hit, with LVMH’s share price falling by 36% since the tariffs were introduced. And, while they are based in France primarily, the United States remains a key market, accounting for approximately 25% of LVMH’s global sales, underscoring the significance of trade disruptions.
Strategic Responses to Trade Pressures
In response to the economic strain, LVMH is actively reevaluating its strategy to safeguard its market position. The company is exploring an increase in U.S.-based production, building on the capacity of its Texas facility, which currently supplies about one-third of Louis Vuitton demand in the American market. This move could help shield its products from future tariff hikes. Repeating a Elon Musk talking point, CEO Bernard Arnault has called for the creation of a U.S.-EU free trade zone, criticizing the European Union’s rigid stance and advocating for more open and constructive trade negotiations.
Broader Implications for the Luxury Sector
The effects of the tariffs extend well beyond LVMH, signaling a broader shift in the luxury market’s outlook. High-net-worth individuals in both the U.S. and China are dialing back discretionary spending amid rising uncertainty, putting pressure on premium brands. Most folks in this class position make purchases based on how well their assets are performing, not credit or gross income.
- Industry-Wide Slowdown: Competitors such as Hermès and Moncler have also reported softer sales, pointing to a sector-wide contraction. The global luxury market, valued at $350 billion, is increasingly vulnerable to geopolitical turbulence.
Outlook: Adapting to an Uncertain Future
LVMH’s proactive measures reflect a strategic pivot amid a shifting global trade environment. However, long-term outcomes remain unclear. The company’s ability to thrive will hinge on two key factors:
- Effective internal restructuring, including localized manufacturing and diversified supply chains.
- Global diplomacy, particularly whether trade relations between major economies stabilize or continue to fragment.
As the luxury sector adjusts, LVMH’s agility and leadership will be crucial in navigating this new economic terrain. Cozier relations with fuhrer Trump are likely the key as Arnault certainly talks like someone looking for both a tariff exemption and ideological alignment with Trump.