Republican nominee Donald Trump was elected to be the next US president this week, defeating Democrat Kamala Harris in an upset that has capped off a uniquely chaotic election season and has shifted American politics further towards the far right.
The stakes were high, with women’s reproductive rights, LGBTQIA+ rights, immigration laws and climate change policy all on the line. Little has been published about Trump’s policy agenda for a second term, but his divisive rhetoric and track record have sent a chill rippling across the fashion industry. After months of advocating for people to get out and vote, as well as celebrating American democracy on the runway at New York Fashion Week, the fashion industry has largely been silent in the wake of the election.
Designer Phillip Lim told followers on Instagram Stories to take time to process the shock and grief, writing: “Just like they do in sports when one of your teammates drops the ball — we have to pick it up and take it to the goal. We[‘re] gonna do this together.” CFDA CEO Steven Kolb said in an emailed statement to Vogue Business: “The CFDA encourages brands to stay true to their values, be agile in their business approach, and stay mindful of their communities as they navigate the post-election landscape. In uncertain times, maintaining open communication, showing empathy, and fostering inclusivity are essential. We’re here to support our members and offer guidance as they adapt to these changes.”
As the nation processes what’s next, we unpack what we know about Trump’s stance on tariffs and the economy.
Higher tariffs
Trump has proposed tariffs on imports into the United States of between 10 and 20 per cent for all goods, and between 60 and 100 per cent on goods from China, on top of existing tariffs.
According to a study published this month by the National Retail Federation (NRF) and research firm Trade Partnership Worldwide, Trump’s tariff proposals in the apparel, footwear, furniture, home appliances, travel goods and toy categories could reduce US consumer spending by $46 billion to $78 billion annually as long as the tariffs are in effect. For apparel and footwear, the NRF predicts price hikes of 12.5 to 20.6 per cent and 18.1 to 28.8 per cent, respectively.
Luxury is already in a downturn, and election anxiety and inflation have softened the spending power of US consumers. In the third quarter, LVMH sales were flat in the US, while Kering sales were down 15 per cent in the region, and Moncler sales fell 6 per cent. Many were waiting out the election to put uncertainty in the past. Prior to the election, HSBC global head of consumer and retail research Erwan Rambourg anticipated a “sequential acceleration of growth in the US linked to the fact that the event will be behind you and will see uncertainties being removed”.
But Trump’s volatility ushers in its own uncertainties. Increased prices on imported goods, for example, could further stifle spending. The NRF wrote in its report that in nearly any scenario floated by Trump in regards to tariffs, the result would be “a net-negative impact on the United States with results ranging up to $7,600 in additional costs annually per household”.
“The adoption of across-the-board tariffs on consumer goods and other non-strategic imports amounts to a tax on American families. It will drive inflation and price increases and will result in job losses,” NRF president and CEO Matthew Shay said in an emailed statement on Wednesday. “The retail industry stands ready to work with President-elect Trump and Congress to enact tax, trade and regulatory policies that make America more competitive, increase domestic investment and create jobs.”
Trump’s proposed tariffs also bode badly for the supply chain, experts say. If enacted as promised, they could upend brands’ supply chains, says Neil Saunders, managing director of retail at Globaldata. “Brands really need to review their sourcing strategies and their supply chains and work through potential impacts and mitigations,” he says. “They basically need to have a plan of action of what they will do if tariffs are imposed,” he says, acknowledging that this is difficult as there are a lot of unknowns around tariff policies”.
Should Trump impose tariffs on European exports to the US, international luxury could come under threat, says Luca Solca, luxury analyst at Bernstein. “If new tariffs on European fashion exports were to be introduced, this would obviously be a negative,” he says. But he’s not counting on this as a singular worry. “That is to be seen, and a stronger USD is definitely good for American spend in Europe — as well as tempering the impact of import duties potentially moving up.”
Lower taxes
Under Trump, the fate of the US economy — the issue that arguably drove Americans towards Trump, analysts say — is still up in the air.
Though tariffs could prompt “stagflation” — which includes slow growth, higher prices and high unemployment, according to Wells Fargo — some analysts predict benefits to the US economy under Trump, if lower taxes for corporations and individuals come to fruition. “If Republicans have control of Congress, then this will be easy to enact,” Saunders says. As of Wednesday afternoon, Republicans had taken control of the Senate, but the House of Representatives vote was too close to call. “Ultimately, that’s helpful for retail spending.” Though, analysts warn lowered taxes could be paired with higher inflation.
Luxury consumers are likely to feel optimistic about lower taxes and other Trump policies that favour the wealthy, says Michael Morris, the Chavkin-Chang professor of leadership at Columbia Business School and author of Tribal, a book on leadership psychology. “It does seem like the immediate reaction is one of economic optimism,” he says.
Saunders also points out that Trump enacted his tax cuts in 2017, and they were set to expire next year; if they are renewed, retailers shouldn’t expect a significant boost in spending on the back of tax cuts that were already in place. He adds that there is a possibility Trump cuts taxes even deeper, including corporate taxes, which would be a positive for retailers.
“All in all, I see reasons to be constructive on President Trump’s re-election for global luxury goods,” Solca says. “Most investors believe that President Trump at the White House will boost the economy. A strong US economy means that we have a higher likelihood of a stronger global economy. This should be good for cyclical sectors — and luxury is a cyclical sector.” The stock market reacted positively to the election outcome, with the S&P 500 rising 2 per cent in the aftermath on Wednesday morning.
Hanging in the balance
There’s more to watch out for under a Trump presidency as organisers and media companies warn of the challenges ahead.
Will the fate of the Tapestry-Capri deal change under his administration after being rejected by the Biden administration’s FTC commissioner? How will ‘Made in the US’ brands fare if the cost of materials and manufacturing rise in tandem with tariffs? If Trump follows through on his threats to deport millions of immigrants, what will that mean for America’s workforce across farms and factories? Will tourists stay away? What about regulations and legislation surrounding climate policy and reform?
“At this point, it’s hard to predict what the net-net will be,” says Morris. “This is a tremendous surprise that points to a deep reassessment of the ways we’ve been thinking. This is a bellwether.”
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