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 giant. 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 luxurious business, which exports the overwhelming majority of its merchandise from France and Italy, onerous in what’s its largest market.
The US accounted for some €86bn in luxurious items gross sales in each 2023 and 2024, in response to 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 a complete about 19 per cent for Hermès in the identical interval.
Any upheaval would come at a very difficult time for the sector because it navigates weak demand in former progress engine China and from prosperous however not super-wealthy consumers within the west.
“We’re in uncharted territory,” stated one one that advises corporations 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 vast. 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 can have a “sliding scale” strategy to tariffs, in response to 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 lately, 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 undertaking 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, in response to federal filings monitoring lobbyist charges and firm experiences. Based on 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 present 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, in response to 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 top 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 distinguished supporter of Democratic candidate Kamala Harris. “Pinault is behind the eight ball” — or presently extra on the again foot — in response to the adviser.
Elsewhere, privately held Chanel has spent greater than $240,000 on lobbying since 2019, in response to 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 prime GOP lobbyist near the Trumps and particularly Don Jr, in response to US legal professionals 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 influence for corporations ought to tariffs be imposed would rely upon whether or not they attempt to go on any value will increase to clients and the way uncovered they’re to extra value delicate center courses.
“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 value is about $10,000. “If you’re selling to aspirational clients, it’s a different thing.”
Steep value rises by most luxurious manufacturers since 2019 limits their means to extend them additional, with costs of some Chanel and Dior luggage up by greater than 50 per cent between 2020 and 2023, in response to Bernstein.
Claudia D’Arpizio, a associate at Bain, stated it could be “impossible . . . to keep increasing prices by 20 per cent” yearly, however did word that luxurious merchandise are to a point shielded as compared with different client items, given there are “no real substitutions among US products”.
Probably the most drastic choice, ought to substantial levies come to go, could 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 important diploma dangers damaging model fairness in an business that justifies its excessive costs by touting the cachet and high quality of merchandise made in France and Italy.
They might additionally face challenges in doing so, added D’Arpizio. “The skills do not exist outside Italy or France”.
Some corporations, comparable to Cartier-owner Richemont, have stated they haven’t any plans to maneuver manufacturing to the US. In the meantime, a plan to strive bottling LVMH-owned Hennessy cognac in China to be able 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 exterior the US, or choices to ship in unfinished elements that may be assembled in nation, in response to luxurious provide chain specialist Dorcas Payne. However the means to try this for leather-based items and equipment is proscribed.
Within the brief time period, gross sales might get a lift from “a feel good factor” amongst wealthy Individuals glad about Trump’s victory and promised insurance policies comparable to tax cuts, in response to Jean Danjou, analyst at Oddo BHF.
However he warned that even tariffs concentrating on China, say, and never Europe pose a danger. “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 influence could be mitigated by purchasing by American vacationers, who already purchase so much 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 replicate that the Texas workshop opened in 2019 was Louis Vuitton’s third on US soil
