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European luxury shares took a hit as investor concerns grew over potential retaliation from Beijing against luxury brands like Hermes and Dior, following the EU’s decision to impose tariffs on Chinese electric vehicles. However, analysts believe that the likelihood of such a move is low.

Patrice Nordey, CEO of Shanghai-based innovation consultancy Trajectry, stated, “It’s a question of how Beijing will respond to the EV tariffs. Is there going to be an escalation? I think yes. Is it going to go after luxury goods? I don’t think so.”

China has targeted industries like brandy, pork, and dairy in response to the EU tariffs on Chinese EVs, affecting companies like LVMH, Hermes, Kering, Ferragamo, and Burberry. However, Jacques Roizen of Digital Luxury Group believes that China is unlikely to target luxury goods due to the positive impact of luxury spending on the Chinese economy.

The Chinese luxury market, accounting for 25% of the global total, has been a significant contributor to the industry, attracting high-end brands to the country. The threat of tariffs or increased consumption taxes on imported luxury goods could impact French luxury conglomerates significantly, given the size of the market.

While the luxury goods industry may seem like a potential target for retaliation, Albert Hu, professor of economics at the China Europe International Business School, believes that both the EU and China aim to avoid a full-scale trade war. China’s cautious approach to retaliatory measures indicates a willingness to negotiate with Brussels.

The complex nature of the luxury goods industry makes it difficult for China to justify claims of dumping, especially for high-end products like handbags. Ultimately, the ongoing trade tensions between the EU and China could have far-reaching implications for the luxury sector, but a direct targeting of luxury goods seems less likely at this point.

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