European luxury shares have dropped amid investor fears that brands like Hermès and Dior could be targeted by Beijing in retaliation for the EU’s tariffs on Chinese electric vehicles (EVs). While analysts, including Patrice Nordey from Trajectry, believe that a move against luxury goods is unlikely, they acknowledge potential escalations in trade tensions. China’s recent responses have focused on sectors like brandy, pork, and dairy, rather than luxury items. Experts like Jacques Roizen highlight that targeting luxury goods would contradict Beijing’s favorable policies aimed at retaining domestic luxury spending, which benefits tax revenues. The Chinese luxury market is projected to account for 35% of global sales this year, making it a critical sector for both Chinese and European economies. Observers suggest that neither side desires a full-scale trade war, as it could negatively impact both economies, and the luxury goods sector’s complexity further complicates any claims of dumping.