Trump is shaking up the French luxurious business | EUROtoday

As if the tariff threats from the weekend weren’t already troublesome sufficient for the French luxurious items business, Donald Trump upped the ante on Monday night. The US President stated he wished to impose tariffs of 200 p.c on French wines and champagne. In this fashion he desires to influence French President Emmanuel Macron to participate in his deliberate “Peace Council”.

Luxury shares then continued their decline. The share worth of world market chief LVMH (Louis Vuitton Moët Hennessy) misplaced as much as three p.c in worth on Tuesday. On Monday the minus was already greater than 4 p.c, and final week the pattern was already downwards. Around 40 billion euros in market capitalization of what was Europe’s most beneficial listed firm three years in the past has vanished into skinny air inside per week.

The gross sales listing additionally included titles from different firms from the French luxurious business, which accounts for round twelve p.c of French items exports. The Gucci mum or dad firm Kering additionally misplaced round 4 p.c in worth on Monday, the leather-based items producer Hermès misplaced 3.5 p.c in worth – and their downward pattern additionally continued on Tuesday. The similar applies to the spirits firm Rémy Cointreau and, to a lesser extent, the cosmetics large L’Oréal and eyewear producer EssilorLuxottica.

The state of affairs is especially delicate for French luxurious producers. Since they promote merchandise “Made in France” on a big scale, American import tariffs hit them with full pressure. In order to maintain their promoting guarantees, they’ll, not like automotive producers, solely shift manufacturing to the USA to a really restricted extent and thus keep away from tariffs. In some instances they don’t seem to be even allowed to take action due to the protected designations of origin.

This implies that the luxurious firms need to shoulder the customs prices themselves or go them on, which both reduces the margin or threatens to scare away middle-class clients. Reducing the vital US enterprise is taken into account unimaginable. This is particularly true for LVMH with its 75 manufacturers starting from purses and jewellery to fragrance and watches to cognac and champagne. The USA lately accounted for 25 p.c of its gross sales. For wine and spirits, the gross sales share was as excessive as 34 p.c.

LVMH employs round 43,000 folks within the USA and has virtually 1,200 boutiques, however the overwhelming majority of the products bought there come from Europe. Three Louis Vuitton purse factories, 4 Tiffany manufacturing amenities, 4 vineyards (Chandon, Phelps, Colgin, Newton) and three LVMH whiskey distilleries (two Woodinville, one SirDavis) within the USA are among the many few instances through which the French luxurious business doesn’t produce at dwelling.

And in the case of the champagne that Trump has focused, relocating manufacturing is unimaginable. The prestigious glowing wine can solely be made with grapes from the area across the cities of Reims, Épernay and Troyes, and solely from native winemakers. Other glowing wines similar to German glowing wine, French crémant or Spanish cava could solely be bought with the addition of “traditional method”. Since the commerce settlement concluded between the EU and the United States in 2006, this has additionally utilized to the US market and glowing wines there similar to California Sparkling Wine.

LVMH’s model portfolio consists of massive champagne homes similar to Moët, Dom Pérignon, Veuve Clicquot, Ruinart, Krug and Mercier, which have plenty of market energy within the small-scale area with round 16,000 winemakers; In 2024, multiple in 5 champagne bottles bought got here from an LVMH model. The eponymous Hennessy cognac can be the undisputed market chief amongst brandies from the French southwest. LVMH additionally homes quite a few status wineries underneath its company umbrella, whether or not Château d’Yquem (Bordeaux), Domaine des Lambrays (Burgundy) or Château Minuty (Provence).

There is lots at stake for the corporate if Trump imposes exorbitant tariffs of 200 p.c. In the previous, LVMH boss and main shareholder Bernard Arnault has tried to place him in a lenient temper. The two males are united by their earlier work in the true property enterprise; they’ve recognized and understood one another for a very long time. After Arnault’s a number of journeys to the USA, folks in France have been already speaking about “shadow diplomacy”. The firm doesn’t need to touch upon the newest tariff threats.

Trump’s announcement additionally weighs closely on the French luxurious business, because it has lengthy been affected by declining demand from the previous growth market of China. Experts level to a mix of lull in consumption and altering client habits for the reason that pandemic, particularly among the many younger Generation Z. Brands within the ultra-luxury section similar to Hermès have been capable of maintain their very own to some extent on this more and more troublesome market setting. However, this was much less true for LVMH’s extra mass-produced merchandise.

The market worth of Arnault’s luxurious empire is a mirrored image of this malaise: whereas it climbed to greater than 450 billion euros in April 2023, it’s at the moment buying and selling at round 280 billion euros. In the third quarter of 2025, LVMH noticed a return to slight development. The enterprise outcomes for 2025 printed subsequent Tuesday will present whether or not this holds. The import tariffs imposed by China on European spirits and thus additionally Hennessy have additionally lately put a pressure on the corporate.

Making issues worse is the decline in wine gross sales world wide. New figures from Champagne verify the downward pattern. Last 12 months, 266 million bottles have been bought, bringing the cumulative decline over three years to 18.3 p.c. The business affiliation Comité Champagne speaks of a “volatile environment, characterized by geopolitical tensions, changing consumer habits, inventory adjustments and inflation”.