European Luxury Stocks Reel Amid China Trade Tensions

European luxury shares have dropped as investors worry about potential Chinese retaliation following EU tariffs on Chinese EVs. Analysts believe targeting luxury items like Hermes handbags and Dior slingbacks is unlikely, despite the current trade tensions focusing on French industries such as brandy and pork.

European luxury shares have experienced a decline due to investor concerns over possible Chinese retaliation after the EU imposed tariffs on Chinese electric vehicles. Despite fears, experts suggest that retaliation targeting luxury goods like Hermes handbags is unlikely.

Analysts, including Patrice Nordey of Trajectry, suggest that while China may escalate trade tensions, it is improbable they will target luxury items due to Beijing's historically favorable policies toward the luxury sector. China's preference has been to encourage domestic luxury spending, as seen with the development of Hainan as a duty-free hub.

With China accounting for a significant share of the global luxury market, any new fiscal policies forcing price hikes could push Chinese consumers to spend overseas, contradictory to government objectives. Experts like Albert Hu from the China Europe International Business School stress that both the EU and China are likely to avoid extreme measures that could trigger a full-scale trade war.

(With inputs from agencies.)