The ripple effects of U.S. tariff increases permeate every corner of the fashion industry. These measures don’t just target affordable apparel from Asia—they’re simultaneously disrupting European luxury houses, American designer labels, contemporary fashion conglomerates, and sportswear brands alike.
On April 2, President Donald Trump signed two executive orders on so-called “reciprocal tariffs” at the White House. The policy imposes a universal 10% “baseline tariff” on all nations (effective April 5 at 12:01 AM EST), with additional customized “reciprocal tariffs” targeting approximately 24 trade deficit partners (effective April 9 at 12:01 AM EST).
This so-called “reciprocal” approach is anything but balanced, representing a severe disruption to global trade norms. For the fashion industry, the policy delivers a triple blow: crippling cross-border e-commerce operations, destabilizing fast fashion retailers, exacerbating challenges in the luxury sector, and significantly dampening domestic consumer demand in the U.S. market.
The United States has been one of the largest markets driving the rebound of the luxury industry after the pandemic. Particularly last year, when luxury consumption in the Asia-Pacific region was sluggish, the relatively stable performance of the U.S. luxury market stood out.
However, the Trump administration’s tariff hikes will directly impact the industry’s sales performance in the U.S. Nearly all major manufacturing hubs for the fashion industry have been hit with heavy tariffs: a 10% tariff on the UK, 20% on the EU, 31% on Switzerland, 34% on China, 46% on Vietnam, 49% on Cambodia, and 37% on Bangladesh.
This policy led to a decline in European luxury stocks on April 4th, hitting their lowest level since November 2022. On that day, shares of luxury giant Kering fell 2.7%, LVMH dropped 1.6%, Burberry slid 5.8%, and Moncler declined 3.7%. Swatch Group fell 6%, Richemont dropped 4.4%, and the Swiss watch industry index fell 5.1%.
The Swiss watch sector experienced a sharper decline due to unique challenges. According to data from the Federation of the Swiss Watch Industry, the U.S. accounts for 22% of Swiss watch exports globally, absorbing CHF 4.7 billion worth of precision timepieces annually. Over the past year, Richemont’s strong performance during the downturn helped drive Switzerland’s trade surplus in the U.S., which also earned Switzerland a hefty 31% tariff. This means brands ranging from Swatch, Rolex, and Patek Philippe to all watchmakers under Richemont will be affected. In the U.S. market, the price of a basic Rolex Oyster Perpetual has already surged from 8,500to8,500to11,135.
Luxury brands such as Hermès, Chanel, Dior, Fendi, and Gucci, which take pride in their French and Italian craftsmanship, may face a 20% tariff increase. If brands pass this additional cost onto consumers, prices for their signature handbags could rise significantly—the Chanel Classic Flap Small in black grained calfskin with gold hardware would jump from 10,400to10,400to12,480; the Hermès Birkin 25 would increase from 12,100to12,100to14,500; and the black lambskin medium Lady Dior, currently priced at 6,500,couldgoupto6,500,couldgoupto7,800.
How brands ultimately manage these higher tariffs remains to be seen. One thing is certain: if the full 20% is transferred to buyers, the sharp price hikes on best-selling items could dampen consumer enthusiasm. The additional tariffs would worsen the luxury industry’s existing challenges—years of frequent price increases have already heightened price sensitivity among shoppers, curbing spending from aspirational buyers and leading to sluggish demand
LVMH CEO Bernard Arnault, anticipating this issue, had already laid the groundwork during Donald Trump’s inauguration in January by shifting some production to the U.S. LVMH has established three Louis Vuitton factories in California and Texas, which now account for about 50% of its U.S. market supply and contribute to a third of its American sales.
However, this may only be a temporary solution. Louis Vuitton alone cannot shield the entire LVMH group from the tariff impact. The U.S. market represents 25% of LVMH’s global sales, and while luxury spending showed signs of recovery in late 2024, the group’s other brands will still feel the strain.
Relocating supply chains solely to avoid tariffs is unlikely to be a viable option for competitors. A key question remains: Can U.S. manufacturing match the expertise of Europe’s historic ateliers? According to The Business of Fashion, aside from Los Angeles, the U.S. lacks sufficient apparel manufacturing infrastructure and skilled labor—and even L.A.’s production capabilities are largely limited to knitwear and denim.
François-Henri Pinault, CEO of Kering, made the group’s stance clear during a February 2024 earnings call: Producing in the U.S. is “pointless.” “We manufacture in Italy and France… We’re selling a part of our culture,” he stated—a sentiment likely shared by many heritage brands. It’s difficult to imagine an Hermès bag being made in America, especially given Walmart’s history of selling $80 knockoff Birkins.
The impact of the Trump administration’s tariff hikes extends far beyond European luxury goods—virtually every fashion brand stands to be affected. Over 98% of apparel and nearly 99% of footwear sold in the U.S. are imported. This includes everything from affordable Asian fashion trends promoted on social media to the majority of products from American brands themselves.
Yes, most U.S. labels rely on overseas production. Brands like The Row and Amiri manufacture largely in Italy, while Tory Burch and Michael Kors source from factories in China, Vietnam, India, and elsewhere. These American companies will now face direct financial strain from the tariffs.
Sportswear brands are particularly vulnerable. During Donald Trump’s first term, many relocated production to Vietnam and Cambodia to circumvent U.S. tariffs. Now, they’re bracing for a second wave of soaring costs. As of 2024, 50% of Nike shoes and a staggering 90% of On Running’s footwear are made in Vietnam.
Unsurprisingly, U.S. fashion stocks plummeted harder than their European counterparts after the policy announcement. Nike and Ralph Lauren saw shares drop by 7%, while Tapestry, Capri, and PVH all declined around 5%—outpacing the S&P 500’s nearly 4% dip that day.
One thing is clear: No one in fashion will emerge unscathed from America’s new tariffs.
