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. Lots of jobs.”
The world’s largest luxurious group obliged. In 2019, Trump attended the opening of Louis Vuitton’s Texan manufacturing facility, its second 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 trade, which exports the overwhelming majority of its merchandise from France and Italy, exhausting in what’s its largest market.
The US accounted for some €86bn in luxurious items gross sales in each 2023 and 2024, in accordance 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 buyers within the west.
“We’re in uncharted territory,” mentioned one one that advises corporations on transatlantic relationships, who added that if the second Trump administration operates like the primary they’ll “give you a listing 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 will be broad. 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 could have a “sliding scale” strategy to tariffs, in accordance with advisers near luxurious teams with data of the scenario.
“I believe everybody’s determining that if they simply get to the massive man, aka Trump, all of it works . . . in the event 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 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 kind of glamorous redevelopment undertaking Trump personally likes.
“With Trump, it’s large man to large 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 accordance with federal filings monitoring lobbyist charges and firm studies. In keeping with folks 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 show a lot of these efforts have been targeted 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 Information, however stopped after 2022, in accordance 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 top of concern over Trump’s makes an attempt to ban travellers from quite a lot of Muslim nations, 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 the moment extra on the again foot — in accordance with the adviser.
Elsewhere, privately held Chanel has spent greater than $240,000 on lobbying since 2019, in accordance 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 accordance with 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 impression for corporations ought to tariffs be imposed would rely on whether or not they attempt to go on any value will increase to prospects and the way uncovered they’re to extra value delicate center lessons.
“Will somebody shopping for an Hermès Kelly maintain again as a result of the value has gone up 15 per cent? In all probability not,” mentioned one particular person near a number of French luxurious teams, referring to a purse whose entry stage value is about $10,000. “In case you’re promoting to aspirational shoppers, it’s a distinct factor.”
Steep value rises by most luxurious manufacturers since 2019 limits their skill to extend them additional, with prices of some Chanel and Dior baggage up by greater than 50 per cent between 2020 and 2023, in accordance with Bernstein.
Claudia D’Arpizio, a accomplice at Bain, mentioned it might be “unattainable . . . to maintain rising costs by 20 per cent” yearly, however did observe that luxurious merchandise are to some extent shielded as compared with different client items, given there are “no actual substitutions amongst US merchandise”.
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 realize, shifting manufacturing to any vital diploma dangers damaging model fairness in an trade 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 abilities don’t exist exterior Italy or France”.
Some corporations, reminiscent of 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 as a way 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 parts that may be assembled in nation, in accordance with luxurious provide chain specialist Dorcas Payne. However the skill to try this for leather-based items and equipment is restricted.
Within the quick time period, gross sales might get a lift from “a really feel good issue” amongst wealthy Individuals blissful about Trump’s victory and promised insurance policies reminiscent of tax cuts, in accordance with Jean Danjou, analyst at Oddo BHF.
However he warned that even tariffs concentrating on China, say, and never Europe pose a threat. “My largest concern is {that a} commerce conflict could be adverse for international progress, particularly for China, hitting total consumption of luxurious items,” he mentioned.
Analysts and executives imagine any tariff impression could be mitigated by buying by American vacationers, who already purchase lots in Europe, ramping up their spending — particularly if the greenback stays sturdy.
“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 troublesome to formulate a transparent standpoint.”
