How Trump’s tariffs are reshaping luxury pricing strategies

Luxury is navigating one of the most precarious crossroads it has encountered in years. With U.S. President Donald Trump imposing a 15% tariff on European luxury goods in July 2025, alongside steeper hikes on Swiss watches, brands are being forced into high-stakes pricing decisions that could reshape consumer behavior in the world’s second-largest luxury market, the U.S. While Camille Drumel, partner at commercial growth consulting firm Simon-Kucher, believes it is difficult to detail the full impact yet, she says “The ability to pass on costs to consumers will depend on several factors: brand desirability and positioning as some brands will have stronger ability to pass on price increases.” “Luxury brands might be more willing to absorb within categories that are playing a recruitment role,” she adds. A squeeze on margins and market value The tariffs have been rattling financial markets over the course of 2025. Since Trump’s tariff announcement in April, Europe’s top 10 luxury groups, including LVMH, Hermès, and Prada, have lost some $100 billion in market capitalization according to financial publication ThisIsMoney. Prada alone shed more than a quarter of its value, while LVMH shares are down 17%. Margins are now under pressure. Brands face a choice: absorb the costs, risking profitability, or raise U.S. prices, which could alienate existing consumers. According to data from AI-powered fashion intelligence platform Retviews by Lectra, Hermès has opted to pass on costs, lifting U.S. handbag prices in July. By contrast, Richemont has delayed hikes, prioritizing long-term loyalty. Chanel, known for its consistent price rises, paused increases for the first time ever in 2025 in an unprecedented sign that luxury houses no longer have expansive pricing power. “The impact of U.S. tariffs on luxury pricing strategies has been highly differentiated, with no single approach emerging across the industry,” Claudia D’Arpizio, Senior Partner and Global Head of Fashion & Luxury Bain & Company tells Jing Daily. “Some luxury players have opted to raise prices only in the U.S., absorbing tariff-related costs directly within that market. Others, however, have implemented broader adjustments across multiple regions.” Data shows early price shifts Data provided exclusively to Jing Daily by Retviews by Lectra indicates that by April, as tariffs loomed, Prada and Loewe were already adjusting their U.S. prices. By June, Gucci, Miu Miu, and other peers followed, with U.S. prices rising above those in their European base markets. Only Bottega Veneta held steady. In contrast, markets such as Japan and Europe saw little movement, highlighting the U.S. as the focal point of tariff-linked inflation. The stakes are particularly high for aspirational consumers. Unlike ultra-high-net-worth buyers, who remain largely insulated, younger and middle-class luxury clients are increasingly price-sensitive. A modest 5% increase on a Loewe Puzzle bag or Gucci Marmont may be enough to deter these buyers, especially at a time when analysts say “greedflation,” post-pandemic price hikes far exceeding inflation, has already started to dent goodwill. The tariff shock is also being compounded by currency volatility. In Japan, a weakening yen has forced brands into their first significant price hikes in years. Historically, Tokyo has been a “luxury bargain” for international shoppers, but that gap is narrowing. The U.S. tariffs and Japan’s currency depreciation are forcing global brands to recalibrate strategies market by market, sometimes resulting in conflicting outcomes. This reliance on excessive price hikes is visible in Chanel’s medium flap bag, once retailing for about $5,300 in 2017, it now costs $10,800 in the U.S. While the French luxury house could justify aggressive increases in the past, the latest pause signals caution amid fears that even wealthy clients are questioning value. Consumer backlash risk rises Luxury is more vulnerable to consumer critiques than a lot of other industries. With U.S. sales already slowing, and Chinese shoppers showing restraint, the industry cannot afford further erosion of trust, particularly among the word’s largest luxury markets. “We have seen over the last three to five years, a global trend to worldwide price harmonization with narrower gap between markets,” says Drumel. “Historically we could observe large gaps between APAC and EU or between EU and U.S., which has now lowered, e.g. Chanel being on the forefront of applying one unique index across all markets.” For now, brands are experimenting with strategies in response to trade tensions. LVMH’s Bernard Arnault has suggested moving some production to the U.S. if tariffs intensify. Others are investing in experiential luxury, such as exclusive events or bespoke services, which strive to preserve desirability without pushing sticker prices higher. A diminished outlook The tariffs also came at a fragile moment. After a post-pandemic boom, then downturn, the industry had hoped 2025 would bring stability. Instead, trade barriers, slowing global demand, and volatile currencies have clouded the outlook. For luxury’s biggest names, the U.S. tariffs are looking like a potential reset of pricing strategies worldwide. D’Arpizio says, “Brands are moving gradually, often through successive waves of increases. This progressive approach helps avoid shocking a demand base that remains fragile, mitigating the risk of alienating customers while still adapting to new tariff pressures.” As adjustments are made across key markets, there is evidence that the automatic annual hikes, once seen as a signifier of exclusivity, are under review. For an industry built on perceptions of value as much as on craftsmanship, navigating tariffs without alienating customers will define the next phase of luxury’s evolution.

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How Trump’s tariffs are reshaping luxury pricing strategies