he announcement, several luxury brands, including Hermes, had already begun raising prices in response to changing market conditions.  Earlier this year, the Birkin bag maker raised its prices by 7 per cent globally, with an additional 5 per cent hike specifically in the US, and the company flagged that it would fully pass on the effects of tariffs to clients. Hermes is not the only luxury brand planning to do so.  Marie Driscoll, a chartered financial analyst and a professor at Parsons, The New School and the Fashion Institute of Technology, expects luxury brands that can cushion the tariff impact to pass along the cost of the tariff, or some of it, to consumers. “Since the cost of goods is a relatively small amount for luxury brands, the impact on retail price should be minimal, in the low single-digit range. The tariff will lightly penalise gross and operating margin, holding all other costs stable,” she said. Financial services firm UBS estimated that a 15 per cent tariff on exports to the United States will require luxury brands on average to raise prices by around 2 per cent in the US, or around 1 per cent globally if they want to avoid widening regional price gaps, or face an impact of around 3 per cent on earnings before interest and tax. However, as Driscoll pointed out, “Passing along the cost isn’t the same as maintaining a gross or earnings before interest and taxes (EBIT) or operating margin, which many public companies would like to do and many investors expect. Strategy of maintaining margins would be considered by some as ‘gouging’ the consumer.” Yet, to what extent will this price “gouging” actually impact consumer sentiment? How consumers will react to EU tariffs placed on luxury goods  Aditya Kaushik, a Coresight analyst, observed that US consumer sentiment shows a “mixed trajectory”. Kaushik explained that “while personal financial sentiment continues to improve very slightly, sentiment toward the economic outlook remains weak.” The Coresight analyst added that although the past three consecutive weeks prior to the tariffs update indicated that households were cautiously optimistic about their own finances, this was likely influenced by policy measures such as delayed tariffs and tax cuts enacted in early July. Kaushik also noted that key disparities remain across income groups.  “Higher-income consumers remain net positive, albeit with slight softening since the start of the year,” Kaushik elaborated, “while middle and lower-income groups are recovering slowly from deeper troughs earlier in 2025.” The Coresight analyst noted that lower-income respondents’ economic expectations remain down 15.7 percentage points year to date.  Kaushik expounded that bifurcation may continue to shape spending patterns, with both premium and discretionary categories benefiting more from the resilient shopping behaviour of higher-income consumers.  “For the true luxury shopper, a low price increase will pass largely unnoticed,” Driscoll said. She pointed out that aspirational shoppers will be more influenced by price shifts caused by the European goods import tariffs than their higher-income counterparts.  “Aspirational shoppers armed with extra cash and nowhere to spend it, except on luxury goods, have been replaced with shoppers seeking values and sharp pricing as they navigate higher prices across most product categories and services,” Driscoll explained.  She noted that luxury brands are likely to adjust assortments to meet value-focused consumers with smaller bags and less costly items in new seasonal flows.  “To expect the margins to hold with decreased demand is unrealistic,” Driscoll added. “Some margin erosion is likely in 2025, which we’ve already seen. Tariffs will further exacerbate financial performance. The aspirational shopper is still engaged, but back to a once or twice a year treat.” Instead of shopping for new luxury goods in-store or online, Kaushik anticipates that even more accessible shoppers will veer towards luxury resale goods. This is where luxury resale sites, such as Vestiaire Collective or The RealReal, or even luxury brands selling their own secondary goods, are poised to benefit and recapture profit margins.