By Rania V. Sedhom
President Trump is planning to implement tariffs on China, Mexico and Canada.
Whether and to what extent the tariffs are implemented remains to be seen but the implications of said tariffs on the luxury industry should not be ignored. The beauty industry is likely to be the hardest hit, as its ingredients and packaging are sourced worldwide, and its margins are narrow.
For indy brands, margins are razor thin and identifying local chemists, formularies and the like may prove fatal.
Beauty braces for impact
Even if they are identified quickly, the costs associated with using local talent may be more expensive than paying the tariff and the locally identified professionals may have to build packaging molds from scratch which also adds to the costs.
For beauty brands, it will feel as if they are walking a tight rope, one misstep can lead to negative, long-term consequences.
Future of fashion
When it comes to fashion, made in China usually sparks conversations about Shein, Zara, Boohoo and other fast fashion. However, since 2001 when China was acknowledged by the World Trade Organization, it became a leading manufacturer of fashion for all fashion categories - fast, premier and luxury.
For example, Prada and Miu Miu products are made in China as are some Gucci and Armani. Many designer sunglasses, leather goods and footwear are also made in China.
While the top 1 percent may not change their spending habits due to tariffs, many HENRYs and aspirational customers may be dissuaded from shopping.
Luxury brands have already raised their prices, as they customarily do at the start of the year. Some products now cost over 10 percent more than they did last year.
If tariffs are added, consumers should expect additional, attendant price hikes. How much are you willing to pay for coveted pieces?
Circular costs
And, although not widely discussed, the secondhand luxury market may be adversely affected. Customers who purchase vintage or used products from international sellers at eBay, for example, may be unable to afford the tariffs and forego the purchase.
Those who do not read the fine print may find that their package is held up awaiting an additional payment. Secondhand retailers like The Real Real may be unable to absorb the tariff and pass them to consumers.
Between the cost increases and the tariffs many aspirational clients and those looking for a deal may be dissuaded from purchasing all together. Time will tell the true appetite for luxury if tariffs are implemented.
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