International Observation | US Tariffs Impact High End Manufacturing in Europe

As the core label of "Made in Europe", the high-end manufacturing industry in Europe, represented by luxury goods, is now under increasing pressure under the impact of US tariff policies. From French leather goods and Swiss watches to German luxury cars, the performance of related companies has collectively plummeted, becoming direct victims of US trade protectionism measures.

Industry insiders pointed out that this tariff storm not only damaged the profits of European brands, but also dealt a heavy blow to consumer confidence in the US market. European companies are forced to raise prices to transfer costs, while American consumers are tightening their wallets even more. Under the continuous impact of tariffs, the short-term profits of high-end manufacturing companies in Europe are under pressure, and the uncertainty of industry growth prospects has significantly increased.

High tariffs impact high-end manufacturing in Europe

Several luxury goods giants in Europe have reported that high tariffs in the United States are pushing the industry into a downward trend. As a representative industry of "Made in Europe", if luxury goods are suppressed for a long time due to tariffs, Europe's export structure, employment, and soft power will be impacted.

According to the financial report of LVMH Group in France, its core fashion and leather goods division had a revenue of 27.61 billion euros in the first three quarters, a decrease of about 8% from 29.92 billion euros in the same period last year. Group Chief Financial Officer Cecil Kabanis pointed out that the US market is facing challenges, and the uncertainty of tariff policies has a negative impact on demand, putting pressure on the department's performance.

French fashion group Kering also suffered a heavy blow, with operating revenue of about 11 billion euros in the first three quarters, a year-on-year decrease of about 12%, and its core brand Gucci's revenue in the first three quarters decreased by about 22% year-on-year.

The high-end automotive industry has not been spared either. In the first three quarters, the operating profit of Porsche Group's automotive business plummeted by about 99% year-on-year, from about 4.035 billion euros to about 40 million euros. Porsche's Executive Director of Finance and Information Technology, Joachim Breckner, stated that the US tariff policy for the entire year of 2025 will result in a loss of approximately 700 million euros for Porsche.

The Swiss watch industry is also facing impact. The United States has imposed a 39% tariff on Swiss watches and related goods since August this year, and Swiss watch exports to the United States plummeted by about 56% year-on-year in September. Swiss watch giant Swatch Group owns well-known brands such as Omega, with the US market accounting for nearly 17% of its exports. The CEO of the group, Nick Heck, stated that all of the company's products are produced in Switzerland, which already incurs high costs, and coupled with nearly 40% tariffs, it is' simply impossible to digest '.

US consumer confidence is being suppressed

For a long time, the United States has been an important market for the luxury goods industry. According to Bain&Company, the US market accounts for over 23% of global personal luxury goods sales. Faced with tariff pressure, European luxury goods companies generally choose to raise prices to maintain profits, weakening the willingness of some American consumers to purchase luxury goods.

Porsche made it clear at its third quarter earnings conference that it will raise prices for the US market in the coming months. Swatch also announced that it will raise product prices by 5% to 15% in the US market. The industry expects that the personal luxury goods market in the United States will shrink throughout the year.

Under the dual pressure of tariffs and economic slowdown, American consumers tend to be cautious about high-end consumption, "said Sebastian Borg, an expert at Boston Consulting Group. Luxury consumption is highly dependent on consumer confidence, and once there is uncertainty in the economic or policy environment, purchasing intentions will rapidly decline. Louis Vuitton's Chief Financial Officer, Kabanis, also stated that the decline in sales performance of the fashion and leather products division is mainly due to structural changes in the consumption of international tourists visiting Europe, with a sharp slowdown in consumption by American tourists.

Industry prospects face significant uncertainty

Although enterprise price increases can alleviate cost pressures in the short term, they also lay long-term hidden dangers. Research suggests that excessive reliance on price increases may not only harm brand image and consumer loyalty, but also scare off potential young customer groups and weaken luxury goods' "cultivating new customers" strategy.

Some high-end European manufacturing companies have attempted to expand production in the United States to avoid tariffs, but face numerous difficulties. Reuters reported that Louis Vuitton set up a factory in Texas, USA in 2019, but faced difficulties due to a lack of skilled workers and low production efficiency. Porsche has also made it clear that due to limited export volume and high product complexity, it is not suitable for the company to build factories in the United States. An executive from Kering Group once said, "The products we produce and sell in Italy and France are part of European culture, and manufacturing in the United States is meaningless

Meanwhile, some companies are attempting to optimize their supply chains to control costs. However, industry insiders point out that such adjustments are costly and there are still doubts about whether the level of craftsmanship can be maintained. Under the impact of tariffs, the global high-end consumer market is facing significant uncertainty and challenges.