The workings of the fashion and luxury goods industries might start to look a bit different in the not-too-distant future. In response to escalating tariffs that are being rolled out by the Trump Administration, brands might be forced to reimagine their manufacturing strategies to bolster production within the United States. The recent imposition of a 25 percent tariff on imports from Canada and Mexico, along with a 10 percent tariff on Chinese goods, is expected to have a significant impact on the fashion industry, which relies heavily on global supply chains. These tariffs are slated to prompt increases in production costs for a large pool of brands, which are toying with the idea of relocating manufacturing operations to the U.S. to avoid these additional expenses.
At the same time, President Trump has suggested the impending levying of tariffs on goods coming from the European Union, which would affect many luxury goods brands. The new administration has not set anything in stone when it comes to duties on goods coming from the EU, but the threat has luxury goods purveyors reeling in light of their relative lack of stateside manufacturing structures.
As TFL noted in a briefing last month, Louis Vuitton may be in the clear to some extent, as LVMH’s largest player maintains several factories in the U.S., including one that it opened in Texas in 2019 during Trump’s first Presidential term. But even against that background, LVMH’s leadership is reportedly giving “serious consider[ation]” to a move to bolster its production capacities in the U.S. – such an effort would not only serve to further shield the luxury titan from potential tariffs but would also align with its broader goal of strengthening its presence in the robust American market, which could be particularly attractive in light of faltering sales in China.
Now, other luxury brands are said to be exploring U.S. manufacturing to mitigate the impacts of tariffs, as well.
A Delicate Balance?
No small feat, a meaningful shift to U.S. manufacturing would be a balancing act for luxury industry entities. After all, the “Made in Italy” or “Made in France” labels that appear on high-end apparel and accessories items “increase their appeal to some consumers,” the Wall Street Journal stated this week. At the same time, a “Swiss Made” label, in particular, has been reported to give rise a whopping 50 percent premium in the value of certain goods, namely, watches.
While a shift from European- to American-made may have been unfathomable in the past (and still would be untenable for certain products, such as those that are subject to geographic indications – like Champagne or Shetland wool), there are a number of factors that might make the endeavor a bit more tempting now. Looking beyond the role that tariffs play in the equation, there are questions to consider about the modern value of “Made in” labels in the luxury goods market. Among them: Do consumers really care what a product’s label says when it comes to country of origin? Shifting consumer values (away from the draw of luxury brands’ heritage, for example) and a rise of less-than-flattering headlines about what “Made in Italy” labels, for instance, actually entail suggest that the adoption of “Made in the USA” labels – as opposed to “Made in France” or “Made in Italy” might not generate negative responses from consumers.
> In other words, the sticking point for brands and consumers is less about the manufacturing country of origin than it is about control of the operations and the quality of the output, “Once a luxury brand operates the factory itself and keeps standards high, its customers are less likely to react badly to production in a new country,” says luxury analyst Luca Solca.
Also, as the WSJ notes, the “Made in America” label has been gaining appeal, offering benefits, such as lower energy costs and potential subsidies for local job creation. A big assumption here, of course, is that such manufacturing is currently possible; there is a reasonable chance that the American manufacturing generally sector lacks the specialized craftsmanship that luxury brands command. Additionally, establishing new facilities requires significant capital investment and time.
But again, it is not unimaginable. Like Louis Vuitton, Rolex has branched out in the U.S. – albeit in a service-focused capacity and not a design/manufacturing one. Even still, it is worth noting that the Swiss watchmaking giant began engaging in stateside expansion in 2001 when it opened the Lititz Watch Technicum in Pennsylvania to address the shortage of skilled watchmakers in the U.S. More recently, it opened its Watchmaking Training Center in Texas in 2023 in order “train students as Rolex Certified Watchmakers and help them pursue careers working in Rolex’s service network across North America.”
Looking Ahead
As the geopolitical landscape continues to evolve, luxury brands are being forced to adopt an increasing amount of agility, balancing the allure of traditional European craftsmanship with the practical benefits of U.S. manufacturing. The rising expansion by luxury goods companies into American production facilities represents a strategic adaptation to current economic challenges, aiming to preserve brand integrity while optimizing operational efficiency and of course, minimizing potential exposure to tariffs.
