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News: Trade War Finally Reaches The Luxury Industry

Luxury companies manufacture the bulk of their high value goods outside of China. Think about the luxury ‘Swiss Made’ watches, the French Made clothing brands, the Italian shoe makers and of course – that Belgian strapmaker ๐Ÿ˜‰ To that extent the industry has been mostly shielded by the Trade War currently further escalating.

What changed a few hours ago is that the Renminbi finally hit that magic number 7. This is the currency which is used by nearly 33% of the purchasing power looking to acquire luxury goods. The Chinese luxury consumer is now officially being negatively impacted by the Trade War.

“A falling yuan is different, directly eroding the purchasing power of Chinese consumers, who account for a third of luxury-goods spending globally and the vast majority of its growth. Chinese tourists will have less to spend overseas, and brands may eventually have to decide whether to raise prices in Mainland China. After the yuan fell in 2015, growth across the industry ground to a halt’.

Let’s also keep in mind that the HK unrest is also further escallating and this already had a big impact on the recent financial performance of more than a few luxury groups.

Check the detailed analysis here in the Wall Street Journal.

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