Donald Trump gave LVMH’s billionaire chief govt Bernard Arnault a pumping handshake as they exited the lifts within the gold and marble foyer of Trump Tower in Manhattan.
“One of many nice males, Mr Arnault,” mentioned Trump — then president-elect for the primary time round — as they wrapped up the January 2017 assembly. “They’re [LVMH] going to do some fantastic issues on this nation. Jobs. A variety of jobs.”
The world’s greatest 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 “actually delivered”, particularly as some merchandise would bear “Made within the USA” labels.
Eight years on, that relationship could 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 business, which exports the overwhelming majority of its merchandise from France and Italy, exhausting in what’s its greatest market.
The US accounted for some €86bn in luxurious items gross sales in each 2023 and 2024, in line with estimates from Bain and luxurious affiliation Altagamma. Final yr, 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 growth engine China and from prosperous however not super-wealthy customers within the west.
“We’re in uncharted territory,” mentioned one one that advises firms on transatlantic relationships, who added that if the second Trump administration operates like the primary they’ll “provide you with an inventory that hits issues they need to hit, and handle folks they don’t need to mess with”.
But Trump’s first stint within the Oval Workplace signifies that the hole between rhetoric and apply might be large. Scott Bessent, Trump’s pick 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 may have a “sliding scale” method to tariffs, in line with advisers near luxurious teams with information of the state of affairs.
“I believe everybody’s determining that if they only get to the large man, aka Trump, all of it works . . . in case you’re the final one that spoke to him, that’s what he thinks,” the adviser mentioned.
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 govt 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 form of glamorous redevelopment undertaking Trump personally likes.
“With Trump, it’s massive man to massive man, [so] Arnault will work that non-public relationship,” the adviser added.
LVMH has additionally spent $1.9mn on lobbying efforts in Washington since 2018, largely with S-3 Group, in line with federal filings monitoring lobbyist charges and firm stories. In line with folks with information of the connection, they’ve labored specifically 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 placed 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 Data, however stopped after 2022, in line with authorities filings.
Chief govt 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 lot 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 at present extra on the again foot — in line with the adviser.
Elsewhere, privately held Chanel has spent greater than $240,000 on lobbying since 2019, in line with 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 consumer of Miller Methods, amongst others, whose founder Jeff Miller is a high GOP lobbyist near the Trumps and particularly Don Jr, in line with US attorneys and political advisers.
LVMH, Kering, Chanel and Pernod Ricard declined to remark. Delgado, S-3, Miller Methods and Capitol Data didn’t reply to requests for remark.
The person impression for firms ought to tariffs be imposed would rely on whether or not they attempt to move on any price will increase to prospects and the way uncovered they’re to extra worth delicate center lessons.
“Will somebody shopping for an Hermès Kelly maintain again as a result of the worth has gone up 15 per cent? Most likely not,” mentioned one particular person near a number of French luxurious teams, referring to a purse whose entry stage worth is about $10,000. “For those who’re promoting to aspirational purchasers, it’s a special factor.”
Steep worth rises by most luxurious manufacturers since 2019 limits their capacity to extend them additional, with prices of some Chanel and Dior luggage up by greater than 50 per cent between 2020 and 2023, in line with Bernstein.
Claudia D’Arpizio, a companion at Bain, mentioned it will be “unattainable . . . to maintain rising costs by 20 per cent” yearly, however did be aware that luxurious merchandise are to some extent shielded as compared with different shopper items, given there are “no actual substitutions amongst US merchandise”.
Essentially the most drastic choice, ought to substantial levies come to move, could be shifting some manufacturing to the US, however the choices for a lot of teams are restricted. Apart from taking years to realize, 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’d additionally face challenges in doing so, added D’Arpizio. “The abilities don’t exist exterior Italy or France”.
Some firms, corresponding to Cartier-owner Richemont, have mentioned 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 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 most likely result in specializing in different markets exterior the US, or choices to ship in unfinished elements that may be assembled in nation, in line with luxurious provide chain specialist Dorcas Payne. However the capacity to try this for leather-based items and equipment is proscribed.
Within the brief time period, gross sales might get a lift from “a really feel good issue” amongst wealthy Individuals joyful about Trump’s victory and promised insurance policies corresponding to tax cuts, in line with Jean Danjou, analyst at Oddo BHF.
However he warned that even tariffs focusing on China, say, and never Europe pose a danger. “My greatest concern is {that a} commerce struggle could be unfavorable for world development, particularly for China, hitting total consumption of luxurious items,” he mentioned.
Analysts and executives imagine any tariff impression could be mitigated by procuring by American vacationers, who already purchase rather a lot in Europe, ramping up their spending — particularly if the greenback stays robust.
“Many luxurious executives don’t suppose they are going to be focused by Trump’s tariffs,” mentioned Danjou. “However with out readability on what he’s going to do on the levies, it’s tough to formulate a transparent standpoint.”
This text has been corrected to mirror that the Texas workshop opened in 2019 was Louis Vuitton’s third on US soil
