Luxury goods under pressure: Threatening US tariffs are weighing on industry giants!

Luxury goods under pressure: Threatening US tariffs are weighing on industry giants!

The luxury goods industry faces a number of challenges in 2025, despite its historical resilience to economic crises. Traditional companies such as Richemont, Swatch and LVMH are currently suffering from uncertainty surrounding US tariffs, which could come into force on July 9th. LVMH reported a 3% decline in sales in the first quarter of 2025, showing that even the so-called crisis-resistant in the industry are not invulnerable, like NZZ reported.

Export markets, particularly the US, are crucial for many luxury brands. LVMH recorded a noticeable decline there, while at the same time the company achieved sales growth in France. The rising tariffs of 31% on Swiss watches and 20% on European luxury goods are putting additional pressure on sales figures. Share prices, including LVMH's, are heavily affected by this uncertainty; the share fell by 37% in the last 12 months, from 903 euros to 438 euros.

Jewelry on the rise, watches on the decline

The jewelry sector, which is becoming increasingly popular as an inflation-protected investment, remains a bright spot. Richemont expects growth here, while declining sales are forecast in the watch sector. Swatch expects a decline of between 5% and 6.8% in its next half-year report, with demand for smartwatches remaining strong as competition to traditional watches.

The situation also looks bleak when it comes to Chinese luxury spending. These fell by around 20 percent in 2024, and no noticeable recovery is expected for 2025. Such developments can put enormous pressure on the entire industry, as China represents one of the largest markets for luxury goods. Vontobel highlights that geopolitical tensions are weighing on sales prospects not only in the USA but also on the European market. Domestic consumption remains subdued in Europe, while international tourists, particularly from the US and the Middle East, stabilize the market.

Reverberating consumer spending

There are already declining trends in the USA. Credit card spending for luxury brands fell about 5 percent in the first few months of 2025 compared to a year ago. High inflation, rising interest rates and fears of a possible recession are adding to concerns about consumer confidence. This means that clients who have traditionally been less affected by economic turbulence are now also acting more cautiously on the markets.

In summary, although the luxury goods industry has experienced stable growth for decades, it is currently facing serious challenges. While demand appears to be waning in the US and China, the European market remains under pressure, which is negatively impacting the growth prospects of renowned brands.