Luxury and US-China tensions: a temporary calm that changes everything
On May 12, an unexpected announcement between Beijing and Washington restored color to luxury stocks. A truce as sudden as it was fragile.
An unexpected customs suspension between the United States and China
After months of heightened tensions, China and the United States have suspended their punitive tariffs for 90 days. The agreement was announced in Geneva, following two days of negotiations. The decision is intended to defuse the escalating trade war launched by the Donald Trump administration.
This tax respite – effective from May 14 – provides for a reduction in taxes on Chinese products imported into America to 30%, while China reduces duties on American products to 10%. Officially, the two powers intend to “balance their trade relations”. Unofficially, each is seeking to preserve its strategic markets.
A breath of fresh air for luxury stock markets
This diplomatic gesture was immediately welcomed by world markets. The CAC 40 jumped 1.46%, London 0.67% and Hong Kong 3%. But it was the luxury goods sector that recorded the most spectacular gains: LVMH +5.2%, Kering SA +5.7%, Hermès +2.8%, L’Oréal +1.5%. Outside France, Burberry soared 6.24%, Richemont +5%, Moncler +4.3%, Hugo Boss +2.83%.
This chain reaction can be explained by the fact that, since the introduction of the surtaxes, manufacturers such as Louis Vuitton and Hermès had raised their prices in the United States, creating pressure on demand. With this truce, the sector is hoping for a slowdown in volatility and a partial recovery in consumption, particularly in China.
A fleeting truce masking an unstable reality
While the suspension is reassuring in the short term, it resolves nothing of substance. Commercial relations between the two giants remain tense. And the 90-day truce can be interrupted at any time.
A reprieve for luxury to watch closely
Luxury goods are breathing a sigh of relief, but remain on their guard. This return to equilibrium is only a reprieve, in a global context where geopolitics now influences the value of leather and perfume.
Also read: De Beers: what lies behind the end of synthetic diamonds
