Rates can take us luxury buyers abroad – UBS

European luxury brands need to raise prices in the US with an average of about 2% to offset the impact of new tariffs, said UBS, warning this step can test American consumers and have the potential to encourage them to shop abroad.

Trading agreements set a 15% tariff for European luxury exports – down from 20% at first, but will still reach margin. Without price increases, Swiss Bank estimates that the EBIT sector can drop 3%. The 1% global price increase will be enough to compensate for its impact.

Some brands don’t wait.

CARIER-owner of Richemont CFR, UHR Swatch, LVMH MC, Hermes RMS, Moncler Moncons, Essilorluxottica El and Ferrari Race have begun to lift prices, per UBS data. Other people have hinted that they will follow.

Although the 2% increase looks easy to manage for luxury consumers, UBS is careful.

“It is important to witness the request in Q3 because it is still unclear whether the resilience of US consumers may have been encouraged by the purchase of pre-emptive in front of the tariff,” wrote UBS analysts including Zuzanna Pusz.

“Such tariff networks are likely to increasingly provide incentives to Luxury American consumers to shop abroad because of the possibility of widening regional price gaps (~ 10%) in addition to the refund of VAT in Europe,” they added.
Source: Reuters (Danilo Masoni)