European luxury goods manufacturers are facing a pricing power test triggered by Trump's tariff policies. Although some brands claim that they can offset tariff costs by raising prices, analysts point out that the price increase space for some brands may be approaching its limit. At the same time, this policy may have a negative impact on the euro exchange rate.

The US market has become a lifeline for luxury goods

With weak sales in major Asian markets, brands such as LVMH's Louis Vuitton and Kering's Gucci are pinning their growth hopes on the US market this year. However, Trump threatened to impose new tariffs on the European Union, citing a trade surplus between the EU and the United States. This policy may have a significant impact on the luxury goods industry.

Hermes and Kering Group executives recently stated that they can absorb additional tariff costs with their brand influence and pricing power. However, frequent price increases over the years may make it difficult for some brands to further transfer costs. UBS data shows that Chanel's classic diamond patterned bag has more than doubled in price since 2010, while Dior's Diana bag and Louis Vuitton's Keepall travel bag have also doubled in price.

HSBC analyst Erwan Rambourg pointed out, "Over the past 12 months, we have been talking about 'greedy inflation', which refers to brands raising prices too quickly and excessively, which may ultimately lead to the loss of high spending customers

The US market: a new engine for luxury goods growth

Against the backdrop of sustained sluggish demand in major Asian countries, European luxury goods companies are shifting their growth hopes towards the US market. UBS predicts that the business growth rate of luxury goods companies in the US market this year may reach 6%, mainly due to the strengthening of the US dollar and the prosperity of the stock market. However, due to an expected 1% decline in sales in major Asian markets, the overall outlook for the industry remains uncertain.

Herm è s CEO Dumas stated that the United States remains the "land of conquest" for the brand and revealed that Herm è s is expanding into second tier cities in the United States, with plans to open new stores in Phoenix and Nashville. LVMH Group also hinted that it may further expand its production scale in the United States.

The image of 'Made in Europe' is hard to shake

Despite facing tariff pressure, executives such as Francois Henri Pinault, CEO of Kering Group, have ruled out the possibility of transferring production to the United States. Pinault stated that this move may weaken the brand's' Made in Europe 'image and is' meaningless'. This stance reflects the European luxury goods industry's commitment to traditional manufacturing locations, but also means that they must address tariff challenges through other means.

Impact on the Euro: Potential Pressure

Trump's tariff policy not only threatens the European luxury goods industry, but may also have a negative impact on the euro exchange rate. As tariffs increase, Europe's exports to the United States may decrease, narrowing its trade surplus and weakening demand for the euro. In addition, as an important component of the European economy, the luxury goods industry may further drag down the economic growth of the eurozone and put pressure on the euro if profits decline due to tariffs.

Summary: The Game between Price Increase and Brand Power

Trump's tariff policy undoubtedly brings new challenges to European luxury goods manufacturers. Although some brands attempt to offset costs by raising prices, frequent price increases may weaken consumer loyalty. At the same time, the balance between the growth potential of the US market and the brand image of "Made in Europe" will be the key to the future development of the industry. This test of pricing power may reshape the global landscape of the luxury goods industry and have a profound impact on the euro exchange rate.