China's tax crackdown piles pressure on luxury brands as US spending falters

• Major luxury stocks have plummeted in 2025: LVMH and Hermes are down about 40% while Kering has fallen 29%, all trading near multi-year lows.
• Mainland China mall data shows sharp deceleration, with smaller 'quiet luxury' brands like Brunello Cucinelli and Loro Piana outperforming more conspicuous brands like Louis Vuitton and Gucci.
• U.S. credit card spending on luxury goods fell for the third consecutive month in August, adding pressure as demand softens in the industry's largest market amid election-related economic uncertainty.

Summary: China's Tax Crackdown Pressures Luxury Brands Amid US Slowdown

China's new tax enforcement on wealthy individuals is compounding challenges for the $350 billion luxury sector, already facing headwinds from geopolitical tensions and weakening US consumer spending.

Key Market Impact:

Major luxury stocks have plummeted in 2025: LVMH and Hermès down approximately 40%, while Kering fell 29%, all trading near multi-year lows. The sector remains mired in a three-year slowdown with limited recovery prospects.

China Tax Crackdown:

Beijing's new regulations require wealthy Chinese to declare and pay back taxes on offshore trust assets by October 22, imposing a 20% levy. This measure is dampening spending among ultra-high-net-worth individuals, previously the most resilient consumer segment despite China's property downturn. Chinese consumers represent roughly one-fifth of global luxury purchases. Bernstein analysts noted summer mall data in mainland China showed "sharp deceleration in growth."

Brand Performance Variations:

Industry sources indicate "quiet luxury" brands like Brunello Cucinelli and Loro Piana are outperforming more conspicuous labels such as Louis Vuitton and Gucci in mainland China. High-end jewelry, particularly Richemont's Cartier, remains a bright spot as wealthy consumers favor precious materials for enduring value.

US Market Concerns:

Credit card spending on luxury goods in the US—the industry's largest market—declined for three consecutive months through August amid weakening consumer confidence ahead of midterm elections.

Upcoming Results:

LVMH reports October 13 with analysts expecting quarterly sales of €18.5 billion ($20.7 billion), up just 1% year-over-year. Kering and Hermès report October 22, with Kering already warning of further Gucci contraction.