Global market rout darkens outlook for European luxury labels

By Mimosa Spencer

PARIS (Reuters) - Growing fears that Donald Trump's tariff blitz volition plunge the satellite into recession are dashing hopes successful the $400-billion-a-year luxury manufacture that affluent Americans mightiness assistance to propulsion it retired of the biggest slump successful years.

One Wall Street expert present expects worldwide income of luxury goods volition autumn by arsenic overmuch arsenic 2% this year, down from a erstwhile forecast for 5% growth. If confirmed, that would people the industry's longest downturn successful implicit 2 decades.

Bernstein expert Luca Solca cited the fallout from Trump's April 2 announcement of import taxes connected large U.S. trading partners arsenic reasons for the downgrade.

"Uncertainty, and the apt continuing rout successful banal markets, are creating a self-fulfilling prophecy: a planetary recession," helium wrote successful a enactment to clients.

Trump's tariffs were much sweeping than galore marketplace players feared, and person prompted retaliation from China, igniting a commercialized warfare that has near banal markets reeling.

Shares successful assemblage person LVMH are present down 2% since the commencement of the year, portion Gucci proprietor Kering is down 31%. Hermes and Cartier proprietor Richemont, seen arsenic amended placed than galore to upwind a downturn acknowledgment to their wealthier clientele, are down 8% and 6% respectively.

"The tariff turmoil has accrued worries," said Mario Ortelli, managing spouse astatine luxury advisory steadfast Ortelli & Co.

"This is not helping the sentiment of the luxury consumer."

All eyes volition beryllium connected LVMH erstwhile it kicks disconnected first-quarter fiscal reports connected April 15.

European manner and jewellery houses similar LVMH's Louis Vuitton, Chanel and Richemont statement Cartier had been counting connected income maturation from affluent Americans to assistance offset anemic request successful China.

"Everything appeared truthful perfectly aligned," astatine the commencement of 2025, said HSBC expert Erwan Rambourg, arsenic banal markets, the dollar, cryptocurrencies, and U.S. user assurance each rose.

But signs of weakness emerged adjacent earlier Trump's tariff bombshell. Citi information released Tuesday showed U.S. recognition paper spending connected luxury brands fell 5% successful March and February, year-on-year, aft increasing the erstwhile 2 months.

Vontobel analysts warned astatine the commencement of April astir increasing "luxury fatigue" and deteriorating U.S. user sentiment.

Then came the marketplace tumult unleashed by Trump's tariffs, perchance a cardinal power connected U.S. spending fixed truthful overmuch of the country's wealthiness is linked to equities.

TRICKY PRICING

Groups similar LVMH, Kering and Richemont are expected to gully connected their brands' pricing powerfulness to shield profits from tariffs, but investors are disquieted that shoppers who tin spend $10,000 leather handbags and golden bracelets could tighten their purse strings against a darkening economical backdrop.