The European fashion industry is entering a period of extreme volatility as US President Donald Trump leverages trade policy to pressure NATO allies over the purchase of Greenland. On January 17, 2026, the administration announced a 10 per cent blanket tariff on all goods from Denmark, France, Italy, and the UK, effective February 1, with a scheduled escalation to 25 per cent by June if a deal is not reached. For a sector already reeling from a 22 per cent profitability dip in 2025, these levies threaten to sever the ‘luxury lifeline’ that American consumers provide. Industry data indicates, EU textile and fashion exports to the US are valued at approximately €7.4 billion ($8.6 billion) annually.
Margin erosion and the ‘Big Bazooka’ retaliation
The fiscal impact is immediate. Retailers such as LVMH and Kering, which derive nearly 25 per cent of their revenue from the US, face a stark choice between absorbing the tariff costs or passing a 15 per cent to 20 per cent price hike to consumers. The margin for error has vanished; we are looking at a potential 0.5 per cent contraction in EU GDP solely due to these trade frictions, noted a lead economist at Business Europe. In response, Brussels is weighing the deployment of its ‘Anti-Coercion Instrument’ - the so-called Big Bazooka - which could see retaliatory duties on US tech and agricultural giants. This ‘tit-for-tat’ spiral threatens to decouple the Transatlantic fashion market just as brands began stabilizing post-inflation.
European fashion remains a primary GDP driver for Italy (5.1 per cent) and France (3.1 per cent), anchored by high-end leather goods and haute couture. In 2026, the sector is prioritizing supply chain ‘de-risking’ by shifting focus to the Middle East and Asian markets. Reorganization plans center on unified commerce to offset physical retail losses caused by rising Transatlantic trade barriers.
