Donald Trump gave LVMH’s billionaire chief government Bernard Arnault a pumping handshake as they exited the lifts within the gold and marble foyer of Trump Tower in Manhattan.
“One of the great men, Mr Arnault,” stated Trump — then president-elect for the primary time round — as they wrapped up the January 2017 assembly. “They’re [LVMH] going to do some wonderful things in this country. Jobs. A lot of jobs.”
The world’s largest luxurious group obliged. In 2019, Trump attended the opening of Louis Vuitton’s Texan manufacturing unit, its third on US soil, the place he declared that Arnault had “really delivered”, particularly as some merchandise would bear “Made in the USA” labels.
Eight years on, that relationship might show a bonus for LVMH as the specter of tariffs looms massive. The second Trump administration has threatened to levy across-the-board tariffs of as much as 20 per cent on exports from Europe whereas China dangers being a lot tougher hit.
Such a transfer dangers hitting the posh trade, which exports the overwhelming majority of its merchandise from France and Italy, arduous in what’s its largest market.
The US accounted for some €86bn in luxurious items gross sales in each 2023 and 2024, based on estimates from Bain and luxurious affiliation Altagamma. Final 12 months, the US accounted for 25 per cent of LVMH’s €86.2bn in revenues. In the meantime, North American gross sales accounted for 23 per cent of Gucci-owner Kering’s gross sales and the Americas as an entire about 19 per cent for Hermès in the identical interval.
Any upheaval would come at a very tough time for the sector because it navigates weak demand in former progress engine China and from prosperous however not super-wealthy customers within the west.
“We’re in uncharted territory,” stated one one who advises firms on transatlantic relationships, who added that if the second Trump administration operates like the primary they may “come up with a list that hits things they want to hit, and take care of people they don’t want to mess with”.
But Trump’s first stint within the Oval Workplace signifies that the hole between rhetoric and apply may be huge. Scott Bessent, Trump’s decide for Treasury secretary, has already described the proposed tariffs as a “maximalist position” — in different phrases, a place to begin for negotiation with buying and selling companions.
The expectation is the administration could have a “sliding scale” strategy to tariffs, based on advisers near luxurious teams with data of the scenario.
“I think everyone’s figuring out that if they just get to the big man, aka Trump, it all works . . . if you’re the last person who spoke to him, that’s what he thinks,” the adviser stated.
The primary line of defence is lobbying. Along with Arnault’s personal relationship with the incoming president — whom he has recognized since his New York actual property days within the Nineteen Eighties — his son Alexandre has met with Trump on a number of events in recent times, together with on visits to Mar-a-Lago whereas he labored as an government at Tiffany & Co within the US.
LVMH has additionally performed a high-profile revamp of Tiffany’s flagship Manhattan retailer after buying the US jeweller in 2021, within the kind of glamorous redevelopment mission Trump personally likes.
“With Trump, it’s big man to big man, [so] Arnault will work that personal relationship,” the adviser added.
LVMH has additionally spent $1.9mn on lobbying efforts in Washington since 2018, largely with S-3 Group, based on federal filings monitoring lobbyist charges and firm experiences. In response to individuals with data of the connection, they’ve labored particularly with Martin Delgado, a well-connected DC lobbyist and Republican donor.
Authorities filings over the previous two years show a lot of these efforts have been centered on advocating for Moët Hennessy, the group’s wines and spirits division, as it really works to pre-empt tariffs there whereas boosting manufacturers hit by a slowdown in US gross sales. In 2019, Trump positioned 25 per cent levies on many European meals and beverage exports in retaliation for EU help for Airbus.
In the meantime Kering, additionally the proprietor of Saint Laurent and Bottega Veneta, spent $60,000 yearly from 2015 to 2021 on lobbying with Capitol Information, however stopped after 2022, based on authorities filings.
Chief government François-Henri Pinault hinted at criticism of Trump’s immigration insurance policies when he posted on social media concerning the want for tolerance and variety on the peak of shock over Trump’s makes an attempt to ban travellers from a variety of Muslim international locations, with out explicitly naming the president. His spouse, the actor Salma Hayek, was a outstanding supporter of Democratic candidate Kamala Harris. “Pinault is behind the eight ball” — or at the moment extra on the again foot — based on the adviser.
Elsewhere, privately held Chanel has spent greater than $240,000 on lobbying since 2019, based on filings. In the meantime, Pernod Ricard has additionally ramped up foyer spending since Trump’s first time period in workplace, spending greater than $8mn since 2017 because it pushed to pre-empt any commerce points on wine and spirits exports.
The drinks firm has been a shopper of Miller Methods, amongst others, whose founder Jeff Miller is a high GOP lobbyist near the Trumps and particularly Don Jr, based on US attorneys and political advisers.
LVMH, Kering, Chanel and Pernod Ricard declined to remark. Delgado, S-3, Miller Methods and Capitol Information didn’t reply to requests for remark.
The person affect for firms ought to tariffs be imposed would rely upon whether or not they attempt to cross on any price will increase to prospects and the way uncovered they’re to extra worth delicate center lessons.
“Will someone buying an Hermès Kelly hold back because the price has gone up 15 per cent? Probably not,” stated one individual near a number of French luxurious teams, referring to a purse whose entry degree worth is about $10,000. “If you’re selling to aspirational clients, it’s a different thing.”
Steep worth rises by most luxurious manufacturers since 2019 limits their capacity to extend them additional, with costs of some Chanel and Dior baggage up by greater than 50 per cent between 2020 and 2023, based on Bernstein.
Claudia D’Arpizio, a associate at Bain, stated it could be “impossible . . . to keep increasing prices by 20 per cent” yearly, however did be aware that luxurious merchandise are to some extent shielded compared with different shopper items, given there are “no real substitutions among US products”.
Probably the most drastic choice, ought to substantial levies come to cross, can be shifting some manufacturing to the US, however the choices for a lot of teams are restricted. Apart from taking years to attain, shifting manufacturing to any vital diploma dangers damaging model fairness in an trade that justifies its excessive costs by touting the cachet and high quality of merchandise made in France and Italy.
They’d additionally face challenges in doing so, added D’Arpizio. “The skills do not exist outside Italy or France”.
Some firms, comparable to Cartier-owner Richemont, have stated they don’t have any plans to maneuver manufacturing to the US. In the meantime, a plan to strive bottling LVMH-owned Hennessy cognac in China with a view to bypass tariff restrictions there was met with employee strikes final month, main the corporate to drop it.
For smaller manufacturers, elevated tariffs would in all probability result in specializing in different markets outdoors the US, or choices to ship in unfinished parts that may be assembled in nation, based on luxurious provide chain specialist Dorcas Payne. However the capacity to do this for leather-based items and equipment is restricted.
Within the brief time period, gross sales might get a lift from “a feel good factor” amongst wealthy People glad about Trump’s victory and promised insurance policies comparable to tax cuts, based on Jean Danjou, analyst at Oddo BHF.
However he warned that even tariffs focusing on China, say, and never Europe pose a threat. “My biggest concern is that a trade war would be negative for global growth, especially for China, hitting overall consumption of luxury goods,” he stated.
Analysts and executives consider any tariff affect can be mitigated by buying by American vacationers, who already purchase loads in Europe, ramping up their spending — particularly if the greenback stays sturdy.
“Many luxury executives do not think they will be targeted by Trump’s tariffs,” stated Danjou. “But without clarity on what he’s going to do on the levies, it’s difficult to formulate a clear point of view.”
This text has been corrected to mirror that the Texas workshop opened in 2019 was Louis Vuitton’s third on US soil
