US Border Tax Adjustment Could Hardly Have Struck European Luxury Brands

At the beginning of the year, the European luxury products market showed signs of recovery: the Chinese market rebounded, the number of tourists traveled to Europe rose, and even Swiss watch exports in last December achieved the first growth since 18 month. However, the new US President Donald Trump proposed "Border Tax Adjustment", may be cast a shadow over the European luxury products market.

With Trump's appointment, US trade protectionism intensified, and Trump has made it clear that he would impose high "border taxes" on local manufacturers who produce and sell products to the United States.

US "border tax adjustment" (BAT) refers to the US imports of goods levy 20% of the tariff, while the US export is duty-free. Barclays Bank said that the "border tax adjustment" to punish the US companies who moved their factories to overseas for manufacturing to protect the "Made in America."

European luxury products groups have expressed concern about the US "border tax adjustment", although their current situation is better than the US counterparts, the future "border tax adjustment" will provide a heavy blow to the European luxury goods group at any time.

JP Morgan Cazenove analysts said the European luxury goods group is facing a lot of risk, because their average 20% of sales are from the United States, but most of their products are produced in Europe. The attractiveness of many luxury brands are from the "origin of manufacturing", such as the luxury brand Burberry coat is manufactured in the United Kingdom Yorkshire factory. Therefore, for the European luxury brands, the possibility of moving factory from the local to the United States for offsetting the value-added tax which benefit is very small.