What Can Be Expected for Luxury in the Second Half of 2025?

From Thursday, August 7 (and no longer August 1) all European products (with the exception of certain sectors) exported to the United States will be subject to a 15% tariff, up from 10% previously, and Swiss goods will be subject to a 39% tariff, the highest rate in Europe. After weeks of negotiations, while Europe has managed to avoid widespread tariffs of 30%, Switzerland is preparing for difficult economic consequences if no agreement is reached by August 7. With Donald Trump targeting luxury goods, can the industry resist?

The United States, a key market for the industry, accounts for around $80 billion of the $363 billion in global sales of luxury goods. It is clear that this decision by the US president undermines the various marketing firms' studies on luxury forecasts for 2025, carried out earlier this year. While Bain & Company was predicting, at best, a further moderate decline and an annual market contraction of between 2% and 5%, what scenario is likely to unfold between now and the end of 2025?

Some argue that the luxury sector's high profit margins will enable it to absorb the shock and emerge more or less unscathed from this diplomatic truce, while others are flying blind.

"Luxury stocks have been particularly hard hit on the stock market, falling 14.1% in the first half of the year, in stark contrast to the 6.6% rise in the Stoxx 600. Globally, however, the luxury goods market remains robust, with sales expected to reach $345 billion by 2025," commented Arthur Jurus, Head of Investment Office, Private Wealth Management at ODDO Suisse, in an interview with Luxury Tribune.

In France, the industry's stronghold, more than 2,000 companies are exposed to these tariffs. Last year, the country exported nearly 8% of its women's ready-to-wear clothing, 13% of its handbag production, and the same percentage of cosmetics. Cosmetics, mostly French, which ship nearly €2.8 billion to the United States (12.6% of French exports), are forecasting an annual loss of €300 million in exports, threatening up to 5,000 jobs in France. Another sector that has been heavily impacted is European wines and spirits, which have also been subject to a 15% tax since August 1, up from 10% previously. The uncertainty surrounding this sector was dispelled on July 27 following an agreement between Ursula von der Leyen and Donald Trump, which could, however, still be subject to change as negotiations are set to continue in the fall.

In contrast, Germany, which exports more than €37 billion worth of cars to the United States each year, sees its situation as “improving,” or in other words, experiencing a storm rather than a hurricane: since April, European manufacturers have been penalized by 27.5% tariffs at the US border, which have now been lowered to 15%.