Tariff threats, wars will slow but not collapse global luxury sales in 2025
by Naharnet Newsdesk 20 June 2025, 15:14
Global sales of personal luxury goods are "slowing down but not collapsing," according to a Bain & Co. consultancy study released Thursday.
Personal luxury goods sales that eroded to 364 billion euros ($419 billion) in 2024 are projected to slide by another 2% to 5% this year, the study said, citing threats of U.S. tariffs and geopolitical tensions triggering economic slowdowns.
"Still, to be positive in a difficult moment — with three wars, economies slowing down, inequality at a maximum ever — it's not a market in collapse,'' said Bain partner and co-author of the study Claudia D'Arpizio. "It is slowing down but not collapsing."
Alongside external headwinds, luxury brands have alienated consumers with an ongoing creativity crisis and sharp price increases, Bain said. Buyers have also been turned off by recent investigations in Italy that revealed that sweatshop conditions in subcontractors making luxury handbags.
Sales are slipping sharply in powerhouse markets the United States and China, the study showed. In the U.S., market volatility due to tariffs has discouraged consumer confidence. China has recorded six quarters of contraction on low consumer confidence.
The Middle East, Latin America and Southeast Asia are recording growth. Europe is mostly flat, the study showed.
This has created a sharp divergence between brands that continue with strong creative and earnings growth, such as the Prada Group, which posted a 13% first-quarter jump in revenue to 1.34 billion euros, and brands like Gucci, where revenue was down 24% to 1.6 billion euros in the same period.
Gucci owner Kering last week hired Italian automotive executive Luca De Meo, the former CEO of Renault, to mount a turnaround. The decision comes as three of its brands — Gucci, Balenciaga and Bottega Veneta — are launching new creative directors.
Kering's stock surged 12% on news of the appointment. D'Arpizio underlined his track record, returning French carmaker Renault to profitability and previous roles as marketing director at Volkswagen and Fiat.
"All of these factors resonate well together in a market like luxury when you are in a phase where growth is still the name of the game, but you also need to make the company more nimble in terms of costs, and turn around some of the brands,'' she said.
Brands are also making changes to minimize the impact of possible U.S. tariffs. These include shipping directly from production sites and not warehouses and reducing stock in stores.
With aesthetic changes afoot "stuffing the channels doesn't make a lot of sense,'' D'Arpizio said.
Still, many of the headwinds buffering the sector are out of companies' control.
"Many of these (negative) aspects are not going to change soon. What can change is more clarity on the tariffs, but I don't think we will stop the wars or the political instability in a few months,'' she said, adding that luxury consumer confidence is tied more closely to stock market trends than geopolitics.
President of Italian luxury brand association Altagamma Matteo Lunelli underlined hat the sector recorded overall growth of 28% from 2019-2024, "placing us well above pre-pandemic levels."
While luxury spending is sensitive to global turmoil, it is historically quick to rebound, powered by new markets and pent-up demand.
The 2008-2009 financial crisis plummeted sales of luxury apparel, handbags and footwear from 161 billion euros to 147 billion euros over two years. The market more than recovered the losses in 2010 as it rebounded by 14%, with an acceleration in the Chinese market. Similarly, after sales plunged by 21% during the pandemic, pent-up spending powered sales to new records.
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Nahar Net
5 hours ago
- Nahar Net
Tariff threats, wars will slow but not collapse global luxury sales in 2025
by Naharnet Newsdesk 20 June 2025, 15:14 Global sales of personal luxury goods are "slowing down but not collapsing," according to a Bain & Co. consultancy study released Thursday. Personal luxury goods sales that eroded to 364 billion euros ($419 billion) in 2024 are projected to slide by another 2% to 5% this year, the study said, citing threats of U.S. tariffs and geopolitical tensions triggering economic slowdowns. "Still, to be positive in a difficult moment — with three wars, economies slowing down, inequality at a maximum ever — it's not a market in collapse,'' said Bain partner and co-author of the study Claudia D'Arpizio. "It is slowing down but not collapsing." Alongside external headwinds, luxury brands have alienated consumers with an ongoing creativity crisis and sharp price increases, Bain said. Buyers have also been turned off by recent investigations in Italy that revealed that sweatshop conditions in subcontractors making luxury handbags. Sales are slipping sharply in powerhouse markets the United States and China, the study showed. In the U.S., market volatility due to tariffs has discouraged consumer confidence. China has recorded six quarters of contraction on low consumer confidence. The Middle East, Latin America and Southeast Asia are recording growth. Europe is mostly flat, the study showed. This has created a sharp divergence between brands that continue with strong creative and earnings growth, such as the Prada Group, which posted a 13% first-quarter jump in revenue to 1.34 billion euros, and brands like Gucci, where revenue was down 24% to 1.6 billion euros in the same period. Gucci owner Kering last week hired Italian automotive executive Luca De Meo, the former CEO of Renault, to mount a turnaround. The decision comes as three of its brands — Gucci, Balenciaga and Bottega Veneta — are launching new creative directors. Kering's stock surged 12% on news of the appointment. D'Arpizio underlined his track record, returning French carmaker Renault to profitability and previous roles as marketing director at Volkswagen and Fiat. "All of these factors resonate well together in a market like luxury when you are in a phase where growth is still the name of the game, but you also need to make the company more nimble in terms of costs, and turn around some of the brands,'' she said. Brands are also making changes to minimize the impact of possible U.S. tariffs. These include shipping directly from production sites and not warehouses and reducing stock in stores. With aesthetic changes afoot "stuffing the channels doesn't make a lot of sense,'' D'Arpizio said. Still, many of the headwinds buffering the sector are out of companies' control. "Many of these (negative) aspects are not going to change soon. What can change is more clarity on the tariffs, but I don't think we will stop the wars or the political instability in a few months,'' she said, adding that luxury consumer confidence is tied more closely to stock market trends than geopolitics. President of Italian luxury brand association Altagamma Matteo Lunelli underlined hat the sector recorded overall growth of 28% from 2019-2024, "placing us well above pre-pandemic levels." While luxury spending is sensitive to global turmoil, it is historically quick to rebound, powered by new markets and pent-up demand. The 2008-2009 financial crisis plummeted sales of luxury apparel, handbags and footwear from 161 billion euros to 147 billion euros over two years. The market more than recovered the losses in 2010 as it rebounded by 14%, with an acceleration in the Chinese market. Similarly, after sales plunged by 21% during the pandemic, pent-up spending powered sales to new records.
Nahar Net
5 hours ago
- Nahar Net
NATO summit success in doubt after Spain rejects big hike in defense spending
by Naharnet Newsdesk 20 June 2025, 15:06 The success of a key NATO summit hung in the balance on Friday, after Spain announced that it cannot raise the billions of dollars needed to meet a new defense investment pledge demanded by U.S. President Donald Trump. Trump and his NATO counterparts are meeting for two days in the Netherlands from next Tuesday. He insists that U.S. allies should commit to spending at least 5% of gross domestic product, but that requires investment at an unprecedented scale. Trump has cast doubt over whether the U.S. would defend allies that spend too little. Setting the spending goal would be a historic decision. It would see all 32 countries invest the same amount in defense for the first time. Only last week, NATO Secretary-General Mark Rutte expressed confidence that they would endorse it. But in a letter to Rutte on Thursday, Prime Minister Pedro Sánchez wrote that "committing to a 5% target would not only be unreasonable, but also counterproductive." "It would move Spain away from optimal spending and it would hinder the (European Union's) ongoing efforts to strengthen its security and defense ecosystem," Sánchez wrote in the letter, seen by The Associated Press. Spain is not entirely alone Belgium, Canada, France and Italy would also struggle to hike security spending by billions of dollars, but Spain is the only country to officially announce its intentions, making it hard to row back from such a public decision. Beyond his economic challenges, Sánchez has other problems. He relies on small parties to govern, and corruption scandals have ensnared his inner circle and family members. He's under growing pressure to call an early election. In response to the letter, Rutte's office said only that "discussions among allies on a new defense investment plan are ongoing." NATO's top civilian official had been due to table a new proposal on Friday to try to break the deadlock. The U.S. and French envoys had also been due to update reporters about the latest developments ahead of the summit but postponed their briefings. Rutte and many European allies are desperate to resolve the problem by Tuesday so that Trump does not derail the summit, as he did during his first term at NATO headquarters in 2018. Budget boosting After Russia's full-scale invasion of Ukraine in 2022, NATO allies agreed that 2% of GDP should be the minimum they spend on their military budgets. But NATO's new plans for defending its own territory against outside attack require investment of at least 3%. Spain agreed to those plans in 2023. The 5% goal is made up of two parts. The allies would agree to hike pure defense spending to 3.5% of GDP. A further 1.5% would go to upgrade roads, bridges, ports and airfields so that armies can better deploy, and to prepare societies for future attacks. Mathematically, 3.5 plus 1.5 equals Trump's 5%. But a lot is hiding behind the figures and details of what kinds of things can be included remain cloudy. Countries closest to Russia, Belarus and Ukraine have all agreed to the target, as well as nearby Germany, Norway, Sweden and the Netherlands, which is hosting the June 24-25 summit. The Netherlands estimates that NATO's defense plans would force it to dedicate at least 3.5% to core defense spending. That means finding an additional 16 billion to 19 billion euros ($18 billion to $22 billion). Supplying arms and ammunition to Ukraine, which Spain does, will also be included as core defense spending. NATO estimates that the U.S. spent around 3.2% of GDP on defense last year. Dual use, making warfighting possible The additional 1.5% spending basket is murkier. Rutte and many members argue that infrastructure used to deploy armies to the front must be included, as well as building up defense industries and preparing citizens for possible attacks. "If a tank is not able to cross a bridge. If our societies are not prepared in case war breaks out for a whole of society approach. If we are not able to really develop the defense industrial base, then the 3.5% is great but you cannot really defend yourselves," Rutte said this month. Spain wanted climate change spending included, but that proposal was rejected. Cyber-security and counter-hybrid warfare investment should also make the cut. Yet with all the conjecture about what might be included, it's difficult to see how Rutte arrived at this 1.5% figure. The when, the how, and a cunning plan It's not enough to agree to spend more money. Many allies haven't yet hit the 2% target, although most will this year, and they had a decade to get there. So an incentive is required. The date of 2032 has been floated as a deadline. That's far shorter than previous NATO targets, but military planners estimate that Russian forces could be capable of launching an attack on an ally within 5-10 years. The U.S. insists that it cannot be an open-ended pledge, and that a decade is too long. Still, Italy says it wants 10 years to hit the 5% target. Another issue is how fast spending should be ramped up. "I have a cunning plan for that," Rutte said. He wants the allies to submit annual plans that lay out how much they intend to increase spending by. The reasons for the spending hike For Europe, Russia's war on Ukraine poses an existential threat. A major rise in sabotage, cyberattacks and GPS jamming incidents is blamed on Moscow. European leaders are girding their citizens for the possibility of more. The United States also insists that China poses a threat. But for European people to back a hike in national defense spending, their governments require acknowledgement that the Kremlin remains NATO's biggest security challenge. The billions required for security will be raised by taxes, going into debt, or shuffling money from other budgets. But it won't be easy for many, as Spain has shown. On top of that, Trump has made things economically tougher by launching a global tariff war — ostensibly for U.S. national security reasons — something America's allies find hard to fathom.
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G7 leaders fail to reach ambitious joint agreements on key issues after Trump's exit
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They also pledged to limit the downsides of artificial intelligence on jobs and the environment, while still embracing the potential of the "technological revolution." There was consensus on other issues, but though the summit was meant to showcase unity on top global concerns, no joint statement on the conflict in Ukraine was released. Zelenskyy had been set to meet with Trump while world leaders were gathering in the Canadian Rocky Mountain resort of Kananaskis, but that was scrapped. The U.S. also previously signed an agreement granting American access to Ukraine's vast mineral resources. A senior Canadian official who briefed reporters at the summit said the U.S. opposed a joint statement on Ukraine amid its efforts to promote negotiations with Russia. The official said it only became clear during the summit's first day on Monday that there wouldn't be a joint statement — though other attendees suggested no consensus agreement was seriously on the table. Emily Williams, a spokeswoman for the prime minister, later retracted the briefing statement and said "no proposed statement regarding Ukraine was distributed to other leaders." In Trump's absence, the remaining six leaders held an extensive session on Ukraine. Lacking unanimity, individual leaders also met with Zelenskyy to reassure him of their support. The summit also was largely overshadowed by a showdown over Iran's nuclear program that could escalate. Israel launched an aerial bombardment campaign against Iran, and Iran has hit back with missiles and drones. French President Emmanuel Macron warned against the U.S. and other powers pushing for regime change in Iran, suggesting it could destabilize the greater Middle East. "I believe the greatest mistake today would be to pursue regime change in Iran through military means, as that would lead to chaos," Macron said. Before leaving, Trump joined the other leaders in issuing a statement saying Iran "can never have a nuclear weapon" and calling for a "de-escalation of hostilities in the Middle East, including a ceasefire in Gaza." Getting unanimity — even on a short and broadly worded statement — was a modest measure of success. Macron said Carney fulfilled his mission as G7 host by preserving the unity of the multilateral organization. "We shouldn't ask the Canadian presidency to resolve every issue on earth today. That would be unfair," said Macron, who will host the G7 next year. Carney said in his final remarks Tuesday evening that Trump's early exit was about the "extraordinary" situation in the Middle East, not anything that occurred during the summit. "There was no problem," Canada's prime minister said. "Mr. Trump felt it was better to be in Washington, and I can understand that." Carney said Canada would impose new economic sanctions against Russia and was releasing its own statement offering "unwavering support for a secure and sovereign Ukraine." Asked if the U.S. pushed to soften any possible joint statement from the gathered leaders on Ukraine, Carney said he consulted with Trump while preparing the language his own country used. Still, Trump's departure only served to heighten the drama of a world on the verge of several firestorms — and of a summit deprived early of its most-watched world leader. ` "We did everything I had to do at the G7," Trump said while flying back to Washington. But things were getting awkward even before he left. After the famous photo from the G7 in 2018 featured Trump and then-German Chancellor Angela Merkel displaying less-than-friendly body language, this year's edition included a dramatic eye-roll by Italian Prime Minister Giorgia Meloni as French President Emmanuel Macron whispered something in her ear during a Monday roundtable. That, and concerns about the Russia-Ukraine war, little progress on the conflict in Gaza and now the situation in Iran have made things all the more tense — especially after Trump imposed severe tariffs on multiple nations that risk a global economic slowdown. Members of Trump's trade team remained in Canada to continue discussing tariffs, including Treasury Secretary Scott Bessent, who sat at the table as world leaders met with Zelenskyy. Trump's stance on Ukraine also put him fundamentally at odds with the other G7 leaders, who are clear that Russia is the aggressor in the war. The U.S. declined to join new sanctions against Russia, with Trump saying, "When I sanction a country, that costs the U.S. a lot of money, a tremendous amount of money." Trump also said at the summit that there would have been no war in Ukraine if G7 members hadn't expelled Putin from the organization in 2014 for annexing Crimea. Kremlin spokesperson Dmitry Peskov said the G7 now looks "very pale and quite useless" compared to "for example, such formats as the G20." Additionally, the U.S. president has placed greater priority on addressing his grievances with other nations' trade policies than on collaboration with G7 allies. He has imposed 50% tariffs on steel and aluminum, as well as 25% tariffs on autos. Trump is also charging a 10% tax on imports from most countries, though he could raise rates on July 9, after the 90-day negotiating period set by him would expire. One bright spot for Trump during the summit came when he and British Prime Minister Keir Starmersigned a trade framework that was previously announced in May. Trump said British trade was "very well protected" because "I like them, that's why. That's their ultimate protection." But, while announcing that agreement, Trump brandished pages spelling out the deal and dropped them. Starmer stooped to pick them up, later explaining that he was compelled to ditch diplomatic decorum because anyone else trying to help risked spooking the president's security team. "There were quite strict rules about who can get close to the president," Starmer said, adding that he was "just deeply conscious that in a situation like that it would not have been good for anybody else to have stepped forward."
