Shares of luxury titans including LVMH, Kering and Hermès International are slipping following President Donald Trump’s threat to tax $2.4 billion worth of French products.
Yesterday, the United States Trade Representative proposed tariffs in retaliation for France’s new digital services tax, which was approved over the summer and charges a 3% tax on revenues earned by companies that provide digital services in the country — affecting tech behemoths such as Amazon, Google and Facebook.
In a statement, the USTR said that the tax is “inconsistent with prevailing principles of international tax policy and is unusually burdensome for affected U.S. companies.” It released a list of items ranging from handbags and makeup to wine and cheese as well as other key exports from France that would be impacted by duties of up to 100%. No time line has been announced as to when the tariffs will take effect.
France’s benchmark stock market index, the CAC 40, closed down 2% and fell 1% in Tuesday trading. Today, LVMH Moët Hennessy saw its stock drop 2.3% as of 10:30 a.m. ET, while Gucci and Balenciaga parent Kering declined 3% and Hermès slipped 2.9%. Shares for French cosmetics giant L’Oréal also suffered a 1% drop.
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French Finance Minister Bruno Le Maire called the tariff threat “unacceptable” and said that the tax did not discriminate against American businesses. “In case of new American sanctions, the European Union would be ready to retaliate,” he added in an interview on Radio Classique.
The move is the latest to hit the luxury industry amid transatlantic trade tensions, including Washington’s tariffs on $7.5 billion worth of European goods — with a 25% duty on British-made apparel and accessories — announced in October, as well as the ongoing dispute between the U.S. and China that has seen tit-for-tat tariffs on billions of dollars’ worth of products from both countries.
Speaking with reporters yesterday, Trump suggested that the White House still intends to move forward with the scheduled 15% levy on Dec. 15, despite recent efforts to settle on a “phase one” trade deal. “In some ways, I like the idea of waiting until after the election for the China deal, but they want to make a deal now, and we will see whether or not the deal is going to be right,” he added.
Major U.S. benchmark indexes also trended downward today — seemingly on the heels of the news. The Dow Jones Industrial Average slid more than 450 points in morning trading, while the S&P 500 took a 1.2% dip and the Nasdaq Composite fell 1.3%.
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