With 20 percent tariffs imposed on European Union countries by U.S. President Donald Trump’s new policy, brands like Hermès, Fendi, Chanel, Gucci and Dior may be forced to increase the prices of some of their bestselling products, including luxury bags made in Italy and France.
Companies can share tariffs with retailers depending on their supply and demand. However, when it comes to the luxury market, “it is likely that most, and perhaps all, of the tariff with be passed on to the buyer in the form of a higher price,” Randall Holcombe, professor of economics at Florida State University, told WWD.
“Purchasers of luxury goods are probably not very price sensitive, so sellers will be able to pass the tariff on to buyers in the form of higher prices. This is more true for luxury goods than for goods that have price-sensitive buyers,” he explained.
Chanel flap bag
Chanel
If the brands pass all 20 percent of the tariffs on to the consumer, here’s how the existing prices of some of the luxury bags could look.
- Chanel flap bag (small, grained calfskin and gold-tone metal, black), currently priced at $10,400 at the brand’s website, could cost $12,480 after tariffs.
- Hermès Birkin typically starts at $12,000, according to Sotheby’s, but it could start at $14,400 after tariffs.
- Fendi Baguette (blue denim-effect FF jacquard bag), currently priced at $3,490 at the brand’s website, could cost $4,188.
- Gucci Jackie bag (medium size), currently priced at $4,800 at the brand’s website, could cost $5,760.
- Dior Saddle bag (medium soft with strap black goatskin), currently priced at $4,400 at the brand’s website, could cost $5,280.
- Dior Lady Dior bag (medium size, black cannage lambskin), currently priced at $6,500 at the brand’s website, could cost $7,800.
Fendi Baguette
Fendi
On Thursday, Citi identified publicly traded companies with the highest revenue exposure to the U.S. market, listing LVMH Moët Hennessy Louis Vuitton (Louis Vuitton, Bulgari, Dior, Fendi, Givenchy and others) with 25 percent and Kering (Yves Saint Laurent, Gucci, Balenciaga, Bottega Veneta, Alexander McQueen and others) with 24 percent. Meanwhile, the luxury companies with lower U.S. exposure were Moncler (13 percent), Swatch Group (15 percent), Prada Group (16 percent), Hermès International (17 percent) and Burberry (19 percent).
For Holcombe, the tariffs “should have a minimal impact on their sales. If luxury brand buyers are less price-sensitive, there will be little need to shift their business models in response to the tariffs,” he said.
In case of retaliatory tariffs — the European Union is preparing tariffs, regulatory measures and restrictions on U.S. firms, expected after Monday — the luxury market should still be the least affected, according to Holcombe. The issue would be if international consumers decide to boycott Made in USA products.
“There are not many American brands that produce for those markets. The bigger impact is likely to be from consumers in other countries who decide not to buy American goods as a protest against U.S. tariff policy. We have already seen this in Canada, for example, where consumers are boycotting U.S. goods,” Holcombe said.
