Designers sending their looks down the runway in Paris will have to worry not just over how well they’re received by critics, but what kind of treatment they get from customs agents on their way to the U.S.
That’s because the administration of President Trump is preparing additional tariffs on a raft of European luxury goods, including handbags, suits and Champagne. Higher duties would leave brands with little choice but to raise prices or take a financial hit.
The levies 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 aircrafts take center stage in the dispute, luxury goods have also been dragged into the fray, frustrating many in the industry that is dealing with fallout from the ongoing U.S. trade war with China.
“It’s got nothing to do with handbags or men’s suits and everything to do with airplanes,” said Karen Giberson, president and chief executive officer of the Accessories Council. “I feel like fashion is a mathematical casualty in some of these tariff issues because they’re trying, in my opinion, to get to a certain dollar threshold or trying to pick products that will make more of a statement.”
Before the U.S. makes its move, though, it is waiting to get the green light from the World Trade Organization. Various media reports state that the global trade body has already approved additional U.S. tariffs in the case and that an official report on the matter with the final details will be released before the end of the month. A spokesman for the WTO did not respond to request for comment.
As of yet, an exact scope of the action is unknown. The U.S. wants to target $11 billion of European imports — the amount it believes the aerospace subsidies cost it in trade per annum, but the WTO will make the final decision so the final list of products to be targeted could change. Tariffs, meanwhile, could potentially be as high as 100 percent, which Giberson believes would be “devastating” for handbag retailers.
That sector has already been hit with 25 percent tariffs on Chinese-made handbags and this will rise to 30 percent next month, double the additional trade war duties on apparel and footwear.
“It puts pressure on the whole system because somewhere that cost has to be absorbed. Retailers that already have existing purchase orders and have already bought merchandise aren’t going to pay more,” she said.
On a company level, LVMH Moët Hennessy Louis Vuitton has been singled out as being particularly vulnerable to the tariffs due to its multiple fashion and beverage companies (in addition to Champagne, wine and whiskey has also been targeted). Its stock closed up 0.8 percent to 370 euros on Friday.
It declined to comment on the tariffs, but in a July earnings call with investors, Jean-Jacques Guiony, LVMH’s chief financial officer, admitted that the giant was “sensitive to tariffs and trade barriers.”
The pain won’t stop there for retailers, as Brussels plans to retaliate, but has to wait for the WTO’s approval as it filed its complaint after the U.S.
And as the industry awaited the WTO’s decision, there were more developments on tariffs Friday, but on Chinese-made goods, with President Trump stating that he didn’t need a China trade deal before the election, as Chinese negotiators cut their trip to U.S. farms short for unknown reasons.
Hours earlier, the U.S. government said it would temporarily exempt some 400 Chinese-made items such as Christmas tree lights and plastic straws from additional levies.
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