The Price of Prestige: How Trump’s Tariff War Is Rattling the Luxury Fashion World

The global luxury fashion supply chain is intricate and highly interdependent, involving everything from raw material sourcing in the global south to finished goods crafted in European ateliers. In the pre-tariff era, many luxury fashion brands relied on cheap and efficient global supply chains to manufacture their goods. China, in particular, played a significant role in producing textiles and sourcing raw materials for luxury brands, but this relationship began to fracture as the Trump administration levied tariffs on Chinese goods, including a broad range of textiles and apparel.

Initially, the industry viewed these tariffs as a minor setback. However, the reality soon became much more complex. Trump’s initial tariff on Chinese goods, which included a broad swath of fashion-related materials like footwear, leather goods and textiles, began to raise production costs significantly for many high-end brands. While major players like LVMH (Louis Vuitton Moët Hennessy) and Kering (owner of Gucci) have global operations and were able to absorb some of the increases, smaller luxury brands have been hit harder by this turmoil in the supply chain.

To mitigate rising costs, luxury houses have begun looking at alternatives to Chinese production. Companies like Prada and Burberry are said to have shifted portions of their supply chain to other countries, such as Vietnam and India, where labour costs are lower, and tariffs are less burdensome—at least for the moment. However, the challenge of maintaining the high-quality standards expected of luxury goods while transitioning production to new countries present significant operational hurdles. In some cases, brands have to spend considerable resources on improving the quality control processes in these new manufacturing hubs, ensuring that the end-product retains the meticulous craftsmanship that luxury consumers expect.

Despite these adjustments, the tariffs continue to weigh heavily on the bottomlines of luxury fashion brands. The financial strain was evident as prices for goods rose across the board. In fact, according to the Financial Times, LVMH raised the prices of its signature Louis Vuitton bags and other products by an average of 10–15% in response to the increasing manufacturing costs. This, in turn, has raised consumer expectations and priced out a significant portion of the aspirational luxury market—those who once admired these brands but could not afford them at their elevated prices.

While the high-net-worth individuals (HNWI) who traditionally support these luxury brands have not yet felt the full impact of price hikes, the middle-income aspirational market has become more selective in its spending, preferring to save up for fewer but more expensive items or choosing to shop at more accessible luxury brands.

Additionally, as Bloomberg reported, these changes are causing a reorganisation of global trade routes, with some brands reconsidering their long-term strategies. Given the high tariffs on Chinese imports, many fashion companies are now examining whether it makes more financial sense to relocate manufacturing closer to consumer markets, particularly in the US or Europe, where there are fewer tariff barriers. In fact, some brands have already begun transitioning some of their production to the US, which is seen as an opportunity to tap into the growing domestic market while sidestepping import tariffs.

The luxury fashion sector, which has traditionally been immune to many of the economic fluctuations that affect other industries, is now facing a more uncertain future. The imposition of tariffs has had an adverse effect on stock prices, as investors begin to react to the shifting financial landscape.

Traditionally, luxury fashion companies were seen as stable, long-term investments, benefiting from steady demand among high-net-worth individuals. However, the tariffs have added volatility to the market, and the financial performance of some major luxury brands has been negatively impacted.

Companies like LVMH and Kering saw their stock prices fluctuate significantly. According to CNBC, LVMH’s stock price dropped by 12% in 2025. Kering, too, experienced a drop of 8% in its stock price. These declines, while not catastrophic, represent a shift in investor sentiment, signalling concerns about the long-term viability of the market under the strain of the trade conflicts.

Further compounding the issue is the pressure on profit margins. With tariffs raising production costs, companies have two choices: absorb the costs or pass them on to consumers in the form of higher prices. For many companies, particularly in the luxury sector, price hikes may not be a sustainable long-term solution. According to Forbes, luxury brands are facing a significant erosion of their profit margins as they navigate the complexities of shifting manufacturing and dealing with higher costs. LVMH, for instance, which operates on relatively thin margins for some of its more entry-level products, has seen a decrease in profitability.

Smaller luxury fashion houses are being particularly hard hit by these changes. As reported by the Wall Street Journal, many of these brands do not have the financial backing to absorb the rising costs, which has led to a decrease in stock market confidence. The volatility is exacerbated by uncertainty regarding future tariff policies, which have led to a period of cautious investment within the luxury fashion sector.

At the same time, the broader industry is grappling with predictions made by top consultants, including Bain & Co, who had projected steady growth for the luxury fashion sector. These projections, made prior to the trade wars, failed to account for the compounded effects of tariffs and shifting consumer expectations. As a result, luxury brands are now facing a confluence of economic disruptions, and Bain’s forecasts—once seen as the benchmark for the luxury sector—are increasingly being called into question. Vogue Businesss notes that these missteps in forecasting have caused some investors to reassess their strategies, unsure of what the future holds for the luxury fashion industry.

While trade tariffs and stock market concerns dominate the conversation within the industry, another disruptive force is coming from an unlikely source: social media. Platforms like TikTok have quickly become powerful tools for influencing consumer behaviour, and luxury brands are now facing the challenge of an increasingly vocal and socially conscious generation of buyers. No longer content with glossy advertisements and traditional brand narratives, these younger consumers are demanding greater transparency and accountability from the companies they buy from.

The rise of TikTok exposes and social media campaigns has sparked a new wave of consumer activism, with many users challenging the luxury sector’s practices regarding sustainability, environmental impact, and labour conditions.

As the Guardian reports, viral campaigns like #LuxuryExpose and #SlowFashion have gained traction, highlighting the disparity between the luxurious prices of goods and the ethical standards (or lack thereof) employed by the brands that produce them. TikTok influencers, many of whom have millions of followers, have begun to expose the environmental degradation associated with the production of luxury goods and the questionable labour practices involved in their creation.

In response to this growing pressure, some luxury brands have started to embrace sustainability initiatives, such as using recycled materials or investing in carbon offset programmes. Gucci, for example, has unveiled a commitment to become carbon neutral by 2025, while Louis Vuitton has announced its plans to reduce water usage in its manufacturing processes. However, these efforts have not been enough to quell the criticism from social media users who demand more substantial changes. Business Insider notes that many TikTok users remain sceptical, viewing these efforts as too little, too late, and branding them as mere “greenwashing.”

Alongside environmental concerns, TikTok has also played a pivotal role in reshaping consumer perceptions of luxury itself. Luxury goods, once synonymous with conspicuous consumption and elitism, are now increasingly associated with excess, and in some cases, social irresponsibility. Younger consumers, driven by TikTok trends, have begun to reject certain brands outright, opting instead for brands that offer more authenticity and social relevance. This shift in consumer sentiment is forcing luxury fashion brands to reimagine their public relations strategies, moving away from traditional glamour and embracing a more socially conscious approach to marketing.

The long-term impact of Trump’s tariff war on luxury fashion is still unfolding. The initial disruptions, particularly to supply chains and production costs, have been compounded with broader economic shifts, stock market volatility, and rising consumer activism driven by social media platforms like TikTok.

Luxury fashion houses now find themselves in a difficult position: they must navigate rising costs, uncertain trade policies, and changing consumer attitudes—all while preserving the exclusivity and prestige that have been the foundation of their brands for decades.

Whether they will adapt successfully to these pressures and maintain their status as symbols of wealth and privilege remains to be seen.