00:00Luxury giants Chanel, Louis Vuitton, and Dior may have dodged the worst in U.S. President Donald Trump's trade deal with the EU,
00:10but a new 15% tariff on European goods threatens to deepen the pressure on an industry already faced with slumping consumer demand and fading pricing power.
00:21While the fresh duties are below the hefty 30% tariff that Trump threatened just weeks ago,
00:28they're a far cry from the zero-for-zero tariff deal the EU was hoping to clinch.
00:33Some high-end labels say they will be able to draw on pricing power to offset the cost of tariffs,
00:40but analysts and industry experts warn some players have limited wiggle room after a series of outsized price hikes,
00:48which have driven a chunk of the brand's profit growth.
00:52Big luxury companies raised prices by 33% on average between 2019 and 2023, according to RBC estimates.
01:02The price tag of Chanel's classic quilted flap bag, for instance, more than tripled between 2015 and 2024,
01:09while the Lady Dior bag and Louis Vuitton keep-all travel bag more than doubled, according to UBS analysts.
01:18Meanwhile, the sector lost 50 million customers last year, according to consulting firm Bain,
01:25as economic pressures and price fatigue dampened appetite for designer clothing and handbags.
01:31UBS estimates that a 15% tariff will require luxury brands on average to raise prices by around 2% in the U.S.
01:40or around 1% globally if they want to avoid widening regional price gaps
01:46or face an impact of around 3% on earnings before interest and tax.
01:52Such hikes may prove challenging, while the latest round of luxury companies' earnings shows little sign of a rebound.
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