Recent trade policy reversals involving Canada and Mexico, coupled with broader global tensions — particularly in Europe — have made long-term planning difficult for luxury companies. As the U.S. economy grapples with uncertainty, so too do the consumers who drive luxury sales.
The impact is already being felt. Luxury giants such as LVMH and Hugo Boss have reported slower-than-expected revenue growth in 2024, signaling a potential cooling of one of the industry's most important markets. HSBC analysts describe the environment as a textbook example of VUCA — volatility, uncertainty, complexity, and ambiguity.
A weakened U.S. dollar against the euro is putting pressure on European luxury brands, many of which manufacture their products in Europe but sell heavily in the U.S. With parity between the two currencies looking unlikely, profit margins are under strain.
Since mid-February, U.S. equity and crypto markets have seen significant downturns. For many American consumers, shrinking portfolios mean fewer discretionary dollars to spend on luxury goods.
Luxury buying isn't just about wealth — it's also about optimism. With trade tensions, tariff unpredictability, and unstable foreign policy dominating headlines, consumer sentiment is cooling, and so is demand.
Yet, it's not all gloom. Despite recent market dips, HSBC notes that U.S. equities remain well above their levels from one to five years ago, indicating that real wealth creation has occurred. The report remains cautiously optimistic, suggesting that leading brands with strong product innovation and strategic positioning can still find growth opportunities in the U.S. market.
A Silver Lining in the East?
China may offer a brighter outlook. HSBC points to a rebound in Chinese equity markets, a renewed pro-business stance from the government, and anecdotal reports from luxury executives suggesting that consumer demand in China is starting to recover. If these trends continue, they could help offset softness in the U.S. and stabilize global performance.
In summary, while the U.S. market faces headwinds, global luxury brands can remain resilient by adapting to shifting dynamics and capitalizing on growth pockets in other regions — especially Asia.
