US Tariffs Test Luxury Brands’ Power to Raise Prices Amid Slowing Demand
Luxury brands like Chanel, Louis Vuitton, and Dior have long relied on steadily raising prices to boost profits. But now, a new 15% tariff on European goods entering the US is making the industry face a tough question: Can they keep hiking prices without losing customers?
Last week, the US and the European Union struck a trade deal that avoided the worst-case scenario of 30% tariffs but introduced a 15% tariff on some EU luxury goods. This tariff brings much-needed clarity for brands selling in their biggest market,the US but it also raises costs that may soon hit shoppers’ wallets.
Between 2019 and 2023, luxury brands raised prices by an average of 33%, helping sales rebound after the pandemic. Iconic items like Chanel’s classic quilted flap bag more than tripled in price since 2015, while Louis Vuitton’s popular travel bags and Dior’s Lady Dior bags have more than doubled in price.
But there’s a limit. Consultancy Bain reports the luxury market lost 50 million customers last year as rising prices and economic worries made some shoppers step back.
Experts say the 15% tariff could push luxury brands to increase US prices by around 2% or raise prices globally by about 1% to avoid big price differences between countries. This might sound small, but combined with previous hikes, it could add up.
Some shoppers are already cautious. Abida Taher, a doctor shopping in New York, said tariffs would make her “think twice” before buying. Precious Buckner, a clinical therapist, said she might prefer buying luxury items resale rather than paying higher store prices.
Some brands that avoided huge price jumps during the post-pandemic boom are now doing better. For example, Hermès is expected to report a 10% sales increase, while big players like LVMH and Gucci are feeling the pinch.
Luxury sales are forecast to shrink between 2% and 5% in 2025, the biggest drop in 15 years outside of the pandemic. To fight back, brands are hiring fresh designers to renew styles and better match prices with product value but change takes time.
Luxury brands face a delicate balancing act: raise prices to cover tariffs and maintain profits, or keep prices steady to keep customers? The answer will shape the future of some of the world’s most famous fashion houses and determine if consumers keep reaching for that iconic handbag or decide to wait.