European luxury brands face pricing dilemma amid potential US tariffs
European luxury brands say they could pull on pricing power to compensate for the cost of any taxes levied by US President Donald Trump, but analysts say some brands may have limited room to increase prices.
European luxury brands, including LVMH, Kering, and Hermès, are bracing for potential tariffs imposed by former US President Donald Trump, who has threatened new trade restrictions on the European Union.
While some luxury executives claim they can leverage pricing power to absorb higher import costs, analysts warn that there may be limited room for further price hikes due to recent aggressive pricing strategies.
Luxury Brands’ Response to Potential Tariffs
Top executives at Hermès and Kering have signaled their willingness to adjust prices if US duties increase.
- Axel Dumas, Executive Chairman of Hermès, stated that the company would raise prices accordingly to compensate for added tariffs.
- Francois-Henri Pinault, CEO of Kering, echoed this stance, saying brands like Gucci, Balenciaga, and Yves Saint Laurent would review their pricing strategies in response to potential trade barriers.
Also read: Germany’s industrial recession deepens amid US tariff threats
The Challenge of Sustained Price Increases
Luxury brands have significantly raised prices over the past decade, particularly following the post-pandemic boom.
- Chanel’s classic quilted flap bag has more than tripled in price since 2010.
- Louis Vuitton’s Keepall travel bag and Dior’s Lady Dior bag have more than doubled in price over the same period.
- Analysts from UBS, Citi, and Bernstein warn that further increases could alienate aspirational consumers, a concern often referred to as “greedflation.”
A Shift Toward Price Moderation in the US.
In 2023, many luxury brands adopted a more cautious pricing approach in the US market:
- Dior kept US prices unchanged.
- Louis Vuitton implemented a modest 2% price hike.
- Chanel raised prices by 5.4%, a slowdown compared to previous years.
- Jewelry brands like Tiffany, Cartier, and Van Cleef & Arpels reduced their annual price hikes from over 8% to 4-6%.
Price Strategy Limitations in 2025
According to Data & Data CEO Zouheir Guedri, luxury brands will have limited flexibility to raise prices further in 2025 without risking global pricing inconsistencies.
If brands attempt significant price hikes in the US, they could widen the price gap between regions, undoing years of efforts to harmonize global pricing.
As a result, luxury companies may need to explore alternative strategies, such as reducing margins, adjusting product mix, or absorbing part of the tariff costs to maintain their competitive position in the lucrative US market.