Beijing’s recent tax measure targeting wealthy Chinese who used offshore trusts is creating fresh headwinds for the global luxury market. The 20% levy, which requires back‑taxes to be declared and paid by Oct. 22, is expected to dampen spending in one of the sector’s most vital markets.
Impact on major brands
Shares of LVMH and Hermès have each fallen about 40% this year, trading near multi‑year lows, while Kering, the parent of Gucci, is down roughly 29%. Analysts say the combined effect of China’s tax crackdown, lingering fallout from the Iran conflict, and signs of weaker consumer confidence in the United States could weigh on third‑quarter earnings due next week.
Chinese consumer slowdown
Chinese buyers account for roughly one‑fifth of global luxury sales. Their demand has already softened since the pandemic, and the new tax is hitting ultra‑high‑net‑worth individuals who previously proved more resilient than middle‑class shoppers affected by China’s prolonged property slump. Alexis Bonhomme, head of Shanghai‑based consultancy Trinity Asia, warned that some wealthy consumers may face liquidity issues until the deadline, noting that “the mood just isn’t there.”
US market shows similar weakness
In the United States, Citi’s tracking of credit‑card spending on luxury goods recorded a third consecutive month of decline in August, reflecting broader consumer unease ahead of the upcoming midterm elections. While high‑end jewellery such as Cartier has benefited from a shift toward gold and other precious metals, overall luxury demand is softening.
Mixed performance among brands
Industry sources say mall traffic in mainland China continues to be weak, though performance varies. Smaller “quiet luxury” labels like Brunello Cuccinelli and LVMH’s Loro Piana are outpacing more conspicuous names such as Louis Vuitton and Gucci. In Beijing, exporter Deng Qi predicts a 20% drop in luxury spending, arguing that the tax sends a broader confidence‑undermining signal.
Looking ahead
Investors will get their first read on the sector next week when LVMH reports quarterly sales, expected to rise 1% to €18.5 billion. Kering and Hermès are slated to report on Oct. 22. The coming weeks will reveal how the tax and lingering US consumer caution shape the luxury market’s recovery.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
