The tariff window: Luxury’s make-or-break moment?

What happened Less than a month after the U.S. and China agreed to temporarily reduce tariffs on each other’s goods, lowering rates from a high of 145% and 125%, to 30% and 10%, respectively, tensions are resurfacing. The 90-day agreement, brokered in Geneva in mid-May, was meant to cool a spiraling trade war that had rattled global markets and frozen luxury sector confidence. But diplomatic progress has faltered. U.S. President Donald Trump recently stated on Truth Social that Chinese President Xi Jinping is “extremely hard to make a deal with,” a remark widely interpreted as a response to Beijing’s delay in lifting export controls on rare earth minerals. Washington has accused China of stalling on promises made during the Geneva talks, particularly around easing restrictions critical to industrial supply chains. In turn, Beijing claims the U.S. has violated the spirit of the deal through renewed tech sanctions and visa cancellations. The resulting standoff leaves brands navigating an unstable landscape with no clear resolution in sight. Amid this geopolitical uncertainty, China’s domestic luxury market remains under pressure. But despite macroeconomic headwinds, mainland Chinese luxury buyers’ confidence has stabilized, according to recent McKinsey and Deutsche Bank surveys. The Jing Take While the temporary easing of tariffs may seem like a step toward normalization, most signs point instead to a fragile and temporary reset. For luxury brands, this window, however brief, represents an opportunity to recalibrate and prepare. “Enduring pricing power and high barriers to entry underpin luxury brands’ resilience,” says Cole Wenner, marketing analyst at China-focused investment manager KraneShares. “These brands can preserve margins even amid global volatility by selectively raising prices and leveraging exclusivity.” Local investment still a blind spot Brands that adopt a wait-and-see approach, hoping for geopolitical clarity, could find themselves at a disadvantage. A closer look at emerging categories and successful strategies highlights where brands can move forward — even in a climate of uncertainty. Brands like Moncler, Jaeger-LeCoutre and Arcteryx have built buzz through large-scale events. And Coach and Ralph Lauren have performed well on Douyin by tailoring digital content for younger Chinese audiences. Meanwhile, Tiffany has continued to invest in physical retail and localized campaigns, signaling confidence despite macro headwinds, and Balenciaga opened new boutiques in Wuhan and Urumqi and expanded in Hangzhou over the past six months. Chanel, long known for its cautious approach to digital platforms, made headlines this week with its debut on Xiaohongshu (also known as RedNote). The move signals a shift in strategy as the maison embraces China’s increasingly platform-agnostic luxury journey, where discovery, engagement, and purchase often happen within the same app. While the launch post spotlighted the maison’s Métiers d’Art show in Hangzhou, sustained traction will require balancing its signature exclusivity with content formats that resonate with younger, socially driven audiences. The wellness and beauty segments also stand out as opportunity-rich. Fenty Beauty’s recent concept store debut in Shenzhen exemplifies how foreign brands can embed themselves in cultural and commercial ecosystems. The sophistication and digital engagement of Chinese consumers will continue to drive long-term value, according to analysts. Underestimating the long game of localization Many global luxury portfolios still maintain significant exposure to cross-border revenue streams — from Chinese tourist spending abroad to duty-free zones and international logistics. While this model was historically profitable, it is increasingly vulnerable to geopolitical volatility and shifting trade policies. “With U.S. and European tariffs in flux, global brands are also quietly recalibrating their Asia strategies, deepening their commitment to China and adjacent markets as a hedge against Western market uncertainty,” Wenner, the analyst says. Brands like Longchamp and Dolce & Gabbana have benefited from investing in Chinese retail infrastructure and tailoring messaging to reflect local values. In parallel, domestic players such as Proya and Florasis are gaining ground by offering culturally resonant, digitally optimized alternatives to global competitors. Adapting to a more fragmented luxury landscape Even if the current truce holds, geopolitical tensions are unlikely to disappear. Wenner points to adjacent markets such as Southeast Asia, India, and the Middle East as increasingly valuable for brands pursuing a “China plus one” model as they offer luxury brands new consumer bases and alternative production hubs. For instance, LVMH continues to build visibility in India, and Dior is perfecting multi-market launches across APAC. This kind of structural agility may prove just as important as price positioning or promotional strategy. For luxury players, the current limbo between tariff truce and renewed tension is not a moment to pause, but a moment to pivot. Brands that localize intentionally, build resilience into supply chains, and expand thoughtfully within Asia are far more likely to emerge from the current uncertainty with their margins — and market share, intact. The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

The tariff window: Luxury’s make-or-break moment?

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Published June 05, 2025

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The tariff window: Luxury’s make-or-break moment?