By Kathryn Hopkins
with contributions from John Zarocostas
 on October 2, 2019

Savile Row suits and Scottish cashmere sweaters could soon become more expensive.

The U.S. said Wednesday it will begin imposing 25 percent tariffs on a raft of British-made clothing items, including men’s suits, women’s swimwear and cashmere sweaters on Oct. 18. It had previously threatened to target apparel and handbags from a number of European countries, but they did not make the final list — although other European luxury goods, including French wine, did.

The administration moved quickly after the World Trade Organization ruled it could impose levies on $7.5 billion of European products annually as part of a spat over aviation subsidies, although this was less than the $11 billion the U.S. had been hoping for.

While the WTO gave it the green light to implement levies as high as 100 percent, the U.S. decided in the end that tariffs for aircraft would be 10 percent — 25 percent for everything else.

Before the final list of items was made public, European luxury stocks fell on the news that tariffs were to be implemented. LVMH Moët Hennessy Louis Vuitton, which was singled out as being particularly vulnerable to the tariffs due to its multiple fashion and beverage companies, saw its share price fall 3.7 percent to 344 euros.

While Champagne was excluded, French wine and Scottish whisky made the final list. LVMH owns Glenmorangie, as well as Moët & Chandon, Ruinart and Chateau Cheval Blanc, among others. Elsewhere, shares of Kering slid 3.8 percent to 436 euros and Burberry closed down 4.8 percent to 20.07 pounds.

In the U.S., already depressed stock markets were driven even lower after the ruling emerged, since it added yet another region to the Trump administration’s global trade battles, which already have depressed manufacturing growth and increased fears of a global economic slowdown. The Dow Jones Industrial Average shed 494 points, or 1.9 percent, to close at 26,078.62.

Among the day’s biggest losers in New York were department stores that sell luxe European goods. Nordstrom Inc. fell 4.9 percent to $31.84, while Macy’s Inc. was 5.9 percent lower to $14.65.

The levies, the largest arbitration award in the history of the WTO, are a result of the worsening battle between the U.S. government and European authorities, which provide subsidies for aerospace company Airbus.

While tariffs on aircraft take center stage in the dispute, the fact that luxury goods, among others, have also been dragged into the fray has frustrated many in the fashion industry, which is already dealing with fallout from the ongoing U.S. trade war with China.

In particular, Chinese-made handbags destined for the U.S. have been hit with 25 percent tariffs and this will rise to 30 percent later this month, double the additional trade war duties on apparel and footwear.

Francesco March, a former director-general at the European Apparel and Textile Confederation, told WWD that the U.S. decision to include textiles and clothing in its potential tariff list was “crazy.”

“It is not through commercial retaliation that a solution will be found. I don’t see the reason even to put textiles and clothing on the black list,” he said. “Companies would be hit very hard.”

U.S. Trade Representative Robert Lighthizer said: “For years, Europe has been providing massive subsidies to Airbus that have seriously injured the U.S. aerospace industry and our workers. Finally, after 15 years of litigation, the WTO has confirmed that the United States is entitled to impose countermeasures in response to the EU’s illegal subsidies.”

As for Europe’s response to the ruling, Brussels plans to retaliate, but has to wait for the WTO’s approval as it filed its complaint after the U.S. The Geneva-based WTO’s decision on that matter will likely come in the first half of next year.

European Commissioner for Trade Cecilia Malmström said: “If the U.S. decides to impose WTO authorized countermeasures, it will be pushing the EU into a situation where we will have no other option than to do the same.”

Read more here:

European Luxury Brace Themselves for U.S. Tariffs

Four Fall Fashion Trends About to Get More Expensive as Tariffs Loom

Who is the U.S. Picking Trade Fights With and How Important Are They to Fashion?


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