The Luxury Industry's Slow Death Strife? We Have a Compromise on Tariffs on European Goods

The United States and the European Union have reached a long-awaited trade agreement that reduces Donald Trump's proposed tariff on European goods to 15 percent. While this represents a political compromise, luxury fashion houses face another challenge.

On July 27, 2025, U.S. President Donald Trump and European Union representatives announced the conclusion of a long-negotiated trade agreement . Instead of threatening a 30% tariff on European goods, the parties agreed on a lower, though still severe, rate of 15% . Although Donald Trump appeared to be lenient with Europe, this poses a serious threat to European luxury goods . Brussels had hoped for a "zero for zero" deal—no tariffs on either side.

Louis Vuitton logo in a shopping mall / Unsplash, Umpholphat Dangam

The introduction of a 15% tariff on goods imported from Europe to the US is another blow to the luxury industry , which has been struggling for months with slowing sales, consumer caution, and geopolitical uncertainty.

Fashion houses such as Louis Vuitton , Chanel and Gucci are not only seeing declining revenues, but are also forced to balance rising costs with customer loyalty.

In the first half of 2025, the Kering Group (owner of Gucci , among others) recorded a 46% drop in net profits. LVMH , the giant behind brands such as Louis Vuitton and Dior , reported a 22% drop. In light of such results, each subsequent burden is a real threat to the stability of the industry.

While a 15% tariff doesn't sound dramatic, its consequences could be far-reaching. UBS estimates it could force price increases of around 2% in the US, which, given the record high prices for handbags, could alienate even the most loyal customers. And let's not forget that some brands, including Louis Vuitton , Chanel , and Hermès , have raised prices on popular handbags this year to get ahead of the economic challenges.

Ironically, among luxury industry leaders, it is Bernard Arnault of LVMH who has been most engaged in conversations with Trump . He was one of the first luxury leaders to visit him at Trump Tower after the 2016 election and also had a front-row seat at his inauguration in 2025.

During Trump's first term, Bernard Arnault opened a Louis Vuitton factory in Texas . Last Thursday, he promised to build another one in the state, responding to the president's hopes of increasing production in the US. Will this be enough to save the luxury industry from the crisis, and will other major players follow suit?