Trump’s Tariffs Expose the Dark Underbelly of Luxury Brands and Their Manufacturing in China
By Shayne Heffernan
The recent escalation of U.S.-China trade tensions, marked by President Donald Trump’s imposition of 145% tariffs on Chinese imports, has cast a harsh spotlight on the luxury goods industry. As Chinese manufacturers retaliate by flooding platforms like TikTok with videos revealing their role in producing high-end products, a stark truth has emerged: many luxury brands, including industry titan LVMH, heavily rely on Chinese manufacturing. As the founder of Knightsbridge and a financial analyst with decades of experience, I’ve watched the luxury sector closely. The tariff fallout has peeled back the curtain on an industry that often sells an illusion, where the value lies more in a logo than in the craftsmanship consumers are led to believe they’re paying for. Let’s dive into the reports on LVMH’s manufacturing in China and explore how luxury brands have built their empires on a carefully curated myth.
LVMH’s Manufacturing in China: The Numbers Tell the Story
LVMH, the world’s largest luxury conglomerate, owns iconic brands like Louis Vuitton, Dior, and Fendi, and has long been seen as a symbol of European craftsmanship. However, recent revelations paint a different picture. According to posts on X, a significant portion of LVMH’s production has shifted to China. One user stated that “half of the ateliers in Europe have been closed down,” with many LVMH products now bearing a “Made in China” label. Another user claimed that LVMH products are manufactured in China, imported to Italy in parts, and then assembled by Chinese workers to legally qualify for a “Made in Italy” label. While these claims from social media are not definitive, they align with broader reports on the luxury industry’s reliance on Chinese manufacturing.
A report from The Financial Express highlighted TikTok videos where Chinese manufacturers showcased their role in producing luxury goods for brands like LVMH. One video specifically mentioned that Dior’s knits and cardigans are made by Beyond Garments in Hangzhou, a supplier that also works for other luxury labels like Sandro, Maje, and Versace. The same report noted that Dior’s cosmetic products are produced by Thai Ho Group, which also supplies Lancome and L’Oréal. These revelations suggest that a significant portion of LVMH’s production—potentially up to 32% of its apparel, based on NPR’s estimate that 32% of all global apparel brands manufacture in China—relies on Chinese factories. While LVMH has made efforts to localize some production in the U.S., with three Louis Vuitton facilities in California and Texas accounting for about 50% of its U.S. product volume, the company’s exposure to China remains substantial.
The scale of this dependency is further underscored by China’s dominance in global textile exports, accounting for 38% of the world’s supply. LVMH’s sales figures also reflect its reliance on the Chinese market: in 2024, the U.S. accounted for 25% of LVMH’s revenue, but sales in Asia (excluding Japan) dropped 16% in the third quarter, largely due to weakened demand in China. This suggests that China is not only a manufacturing hub but also a critical market for LVMH, making the tariff war a double blow.
Luxury Brands: An Illusion Selling a Logo
The luxury industry has long cultivated an image of exclusivity, rooted in the idea of European craftsmanship—think “Made in Italy” or “Made in France” labels that evoke visions of skilled artisans in historic ateliers. But the reality exposed by Trump’s tariffs and the Chinese manufacturers’ response is far less glamorous. These brands are often selling an illusion, where the logo itself is the product, not the craftsmanship or quality consumers are led to believe they’re buying.
Chinese manufacturers have taken to platforms like TikTok and X to reveal the stark cost disparities. A Business Standard report highlighted videos showing factory workers detailing the production of luxury goods, such as a Birkin bag, which retails for $34,000 but costs only $1,400 to manufacture. The markup, they argue, is entirely in the branding. Another video compared a bulk bag of laundry capsules—priced at $1 in China—to its U.S. retail price of $13, illustrating how branding inflates costs across industries. These revelations challenge the narrative that luxury goods are inherently superior due to their origin or craftsmanship. As one TikTok user pointed out, if the same factory and materials are used, “why the huge markup?”
This isn’t just about cost—it’s about perception. Luxury brands like LVMH rely on the mystique of their logos to justify exorbitant prices. A Louis Vuitton bag or a Dior dress isn’t just a product; it’s a status symbol, carefully marketed to convey wealth and exclusivity. Yet, when Chinese factories reveal that they’re producing these items for pennies on the dollar, the illusion shatters. The “Made in Italy” label, often a legal loophole achieved by assembling Chinese-made parts in Europe, becomes a hollow promise. As one X user noted, “Brand value is only perceived. When no longer perceived as luxury, the game is over.”
The Dark Underbelly: Exploitation and Deception
Trump’s tariffs, while aimed at protecting U.S. manufacturing, have inadvertently exposed a darker side of the luxury industry: its reliance on cheap labor and deceptive practices. Chinese manufacturers, in retaliation, have highlighted their meticulous production processes, countering the stereotype of poor-quality goods. But the real issue lies in the exploitation baked into the luxury supply chain. Factories in China often operate under conditions that allow for low production costs—conditions that would be unacceptable in the European ateliers luxury brands romanticize. Workers in these factories, producing goods for brands like LVMH, are paid a fraction of what the final product sells for, while the brands pocket the difference as profit.
Moreover, the tariff war has revealed how luxury brands use their supply chains to deceive consumers. By assembling products in Italy or France after manufacturing them in China, brands like LVMH exploit legal loopholes to claim a “Made in” label that justifies their price tags. This practice isn’t just about cost savings—it’s about preserving an illusion that keeps consumers paying thousands for a logo. The irony is stark: as Chinese manufacturers encourage direct purchases, offering the same products at a fraction of the cost, they’re undercutting the very brands they supply, exposing the markup as nothing more than a branding tax.
A Reckoning for Luxury Brands
The fallout from Trump’s tariffs, with China imposing 125% tariffs in retaliation, has forced a reckoning in the luxury industry. LVMH and its peers are now grappling with a tarnished image and a potential loss of their American customer base, which has been a lifeline amid a slowdown in China. The U.S., with its wealthy, consumption-driven population, accounted for 25% of LVMH’s revenue in 2024, but sales there fell 3% in the first quarter of 2025, partly due to tariff-related uncertainty. European brands, which pride themselves on their heritage, are now at risk of losing the trust of consumers who feel betrayed by the revelation that their $5,000 handbag was made in a Chinese factory for a fraction of the cost.
As I see it, the luxury industry’s reliance on China—both as a manufacturing hub and a market—has left it vulnerable to geopolitical shifts like the current trade war. More importantly, it has exposed the fragility of an business model built on illusion. Luxury brands aren’t selling quality or craftsmanship; they’re selling a logo, a perception that crumbles when the truth comes to light. For consumers, this is a wake-up call to question the value of what they’re buying. For brands like LVMH, it’s a challenge to rethink their supply chains and their storytelling—or risk losing the mystique that has fueled their profits for decades.
Shayne Heffernan is a financial analyst and the founder of Knightsbridge, a global investment firm. With over 40 years of experience, he closely monitors economic trends and financial innovations.
Sources: The Financial Express, Business Standard, NPR, and posts on X.
