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 the great men, 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 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 facility, 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 more durable hit.
Such a transfer dangers hitting the posh trade, 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 line with 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 tough time for the sector because it navigates weak demand in former development engine China and from prosperous however not super-wealthy customers within the west.
“We’re in uncharted territory,” mentioned one one who advises corporations on transatlantic relationships, who added that if the second Trump administration operates like the primary they are going to “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 follow could 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 line with 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 mentioned.
The primary line of defence is lobbying. Along with Arnault’s personal relationship with the incoming president — whom he has identified since his New York actual property days within the 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 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 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 line with federal filings monitoring lobbyist charges and firm reviews. 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 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 positioned 25 per cent levies on many European meals and beverage exports in retaliation for EU assist 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 top of concern over Trump’s makes an attempt to ban travellers from plenty 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 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 prime 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 affect for corporations ought to tariffs be imposed would depend upon whether or not they attempt to go on any price will increase to clients and the way uncovered they’re to extra worth delicate center lessons.
“Will someone buying an Hermès Kelly hold back because the price has gone up 15 per cent? Probably not,” mentioned one particular person near a number of French luxurious teams, referring to a purse whose entry degree worth is about $10,000. “If you’re selling to aspirational clients, it’s a different thing.”
Steep worth rises by most luxurious manufacturers since 2019 limits their skill to extend them additional, with costs of some Chanel and Dior baggage up by greater than 50 per cent between 2020 and 2023, in line with Bernstein.
Claudia D’Arpizio, a associate at Bain, mentioned it might be “impossible . . . to keep increasing prices by 20 per cent” yearly, however did be aware that luxurious merchandise are to a point shielded compared with different shopper items, given there are “no real substitutions among US products”.
Essentially the most drastic choice, ought to substantial levies come to go, can be shifting some manufacturing to the US, however the choices for a lot of teams are restricted. Moreover taking years to attain, 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 skills do not exist outside Italy or France”.
Some corporations, resembling Cartier-owner Richemont, have mentioned they haven’t any plans to maneuver manufacturing to the US. In the meantime, a plan to attempt bottling LVMH-owned Hennessy cognac in China so as 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 outdoors 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 skill to do this for leather-based items and equipment is proscribed.
Within the quick time period, gross sales may get a lift from “a feel good factor” amongst wealthy Individuals joyful about Trump’s victory and promised insurance policies resembling tax cuts, in line with 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 mentioned.
Analysts and executives imagine any tariff affect can be mitigated by procuring by American vacationers, who already purchase loads 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,” mentioned 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
