An endless tirade of rhetoric from presidents Donald Trump and Xi Jinping may be the straw that breaks the camel's back, as the endless U.S. / China trade war could be a massive blow to the luxury goods industry.
The well-heeled fashion cognoscenti in abundance across China are the ones to feel the pinch as Balenciaga Triple S trainers, diamond bezel Patek Phillipe watches and velour Gucci tracksuits might become a rarer sight in the mainland of China, as a result of the global tension.
Contrary to vox populi, Luxury magnet Richemont SA stated ‘Chinese demand proved resilient to the threats’ as sales at home have risen by a percentage into the double digits over the past year. However, the travelling Chinese luxury consumer was slightly lower, operating in high single digits.
What goes up...
Heightened consumption never lasts, the world is on tenterhooks about whether the global trade spat will result in a gradual slowdown or a brake-screeching halt.
The past three years have seen overwhelming growth in the luxury sector. Attributed to the terrorism in 2016 / 17 in Paris and crackdown on Chinese gift-giving, this meant coffers were kept at bay by usual spenders who were temporarily derailed from spending. However, more recent reductions in duties on luxury goods purchased domestically, have resulted in more frequent home purchases.
Yet over the past few weeks, several factors have raised the risk of a worse outcome.
Your money 's no good here...
A weak yuan makes purchasing European luxury goods more expensive for Chinese travellers, additionally, the drop in the yuan against the euro and the dollar is bad news for European brands who benefit from travelling Chinese consumers with their penchant for all things Hermes and Dior.
At this stage, all is not clear on the trade front. The world has seen far worse, and the world of high fashion and seasoned shoppers still prevails. Let’s hope things do not get any worse as there may be a few less Dior Saddlebags in the world, or in China at least.