Luxury Goods and Trade Tensions: What's Next?

Amidst trade tensions between the EU and China, European luxury stocks saw a downturn due to fears of potential Chinese retaliation. However, experts suggest that targeting luxury goods is unlikely. This is because such actions would oppose China's favorable policies towards luxury brands within its own market.

European luxury stocks experienced a notable drop as investors speculated about potential Chinese retaliation against high-end brands like Hermes and Dior, following the EU's decision to impose tariffs on Chinese electric vehicles. Despite these fears, analysts believe that Beijing is unlikely to target luxury goods directly.

Amid this backdrop, China has retaliated against the EU by imposing temporary anti-dumping measures on brandy, pork, and dairy—key industries for France, which has been advocating for tariffs on Chinese-made EVs. Shares of major luxury groups, including LVMH and Kering, have fallen by 2%-6%.

Industry experts argue that targeting luxury goods would run contrary to China's existing favorable economic policies for luxury products. The significant contribution of the luxury market to China's tax revenue and economy suggests a continued preference for domestic luxury consumption and investment.

(With inputs from agencies.)