The European fashion and luxury industry is bracing for a severe operational disruption following US President Donald Trump’s announcement of a 10 per cent tariff on eight European nations, effective February 1, 2026. Linked to a geopolitical demand for the purchase of Greenland, the levies are scheduled to escalate to 25 per cent by June, potentially upending a multi-billion dollar apparel trade. Industry body Euratex reports, the US remains the primary non-European destination for textile and clothing exports, valued at approximately €6.5 billion annually. The prospect of these ‘Greenland tariffs’ has triggered emergency summits in Brussels, with leaders weighing a €93 billion retaliatory ‘bazooka’ package targeting U.S. liquid gas and machinery.
Supply chain paralysis and pricing volatility
Operating on long-term seasonal forecasting, European ateliers currently face a climate of ‘operational paralysis.’ For high-end houses in Italy and France - where fashion contributes 5.1 per cent and 3.1 per cent to national GDP respectively - the tariffs represent an immediate threat to margins. Analysts suggest, luxury conglomerates like LVMH and Kering may be forced to pass these costs to US consumers, where prices for iconic items like the Chanel 2.55 flap bag have already doubled since 2017. Current trade data reveals, while European apparel exports to the US rose by 7 per cent in late 2025 due to front-loading, a sharp correction is anticipated as shipping lead times make it impossible to avoid the February 1 deadline.
Strategic move towards market diversification
In response to the escalating trade war, European manufacturers are accelerating a strategic shift toward Asian and domestic markets. Retail square footage for luxury brands in the US had increased by 65 per cent in early 2025, but that investment is now being re-evaluated in favor of ‘proximity sourcing’ and nearshoring. While the US Supreme Court is expected to rule on the legality of these emergency tariffs by June 2026, the current uncertainty is driving firms to diversify. As one executive noted, the industry is essentially ‘holding fire’ until conditions stabilize, risking years of brand-building in its second-largest global market.
The EU textile and clothing industry comprises 160,000 companies, predominantly SMEs, employing 1.5 million workers. It generates an annual turnover of €180 billion, with the U.S. serving as its most critical individual export market. Recent strategy shifts focus on high-value ‘Smart Textiles’ and digital traceability to maintain global competitiveness.
