What Arnault’s bromance with Trump says about trade between the United States and the EU

That has put Trump’s whispers like Arnault in an awkward position. Although in no way is the main culprit of the EU trade surplus with the US. UU. That Trump hates so much, luxury products sold by LVMH, such as wine and spirits, are France’s key export sector after the aerospace industry. The US market UU. It contributes around 24% of the group’s income, almost as much as France and Europe together. The cunning of the supply chain, and the ability of the luxury industry to transmit price increases to its wealthy buyers, have so far helped keep the wolf out of the door. LVMH’s promise to create 1,000 jobs in Texas, even if a “Made in the US” label It takes noses up, has made Trump less likely to want to penalize the company with luxury taxes. He is also less likely to oppose the proposed acquisition by Arnault of $ 16 billion from iconic American jeweler Tiffany & Co. It’s not just LVMH: Airbus, one of Trump’s favorite punching bags and the biggest brand in the sector European aerospace, achieved a similar feat. His local presence in Alabama has saved the plane he produces in the US. UU. Of the EU 10% tariffs (and probably deterred Trump from more expensive tariffs). Taking into account that France is being pointed out for a more severe punishment, the fact that LVMH and Airbus, which are listed on the Paris stock exchange, are among the top five best-performing first-line actions in the euro area since Trump arrived at the White House, will comfort French President Emmanuel Macron.

But how much longer can you transfer resources to the US? UU.? Airbus is struggling to continue increasing production in Alabama, where its investment now totals $ 1 billion, but that has not been enough to silence the threat of higher tariffs. For the luxury goods sector, not everything “Made in France” can be “Made in the USA”. LVMH is smart enough to sell sparkling wine from the USA. UU. Made locally in single-service funky bottles, but it will never be the same as champagne. European corporate acquisitions of US goals. UU., While increasing, they are vulnerable to Trump’s unpredictability. Europe’s leading multinationals may also have been helped by the fact that Trump’s approach so far has been mainly in China. Being a secondary target has not been so bad for the EU: tariffs between China and the US. UU. They actually saw France get a total increase in exports to both countries with an estimated value of 0.3% of GDP, according to Nomura’s research. (For Germany it was 0.1%).

It is clear that exporting high-value items that are difficult to replace, such as airplanes or luxury items, is a natural defense against trade wars; Airbus was also helped by Boeing problems. But China may now be receding into Trump’s rearview mirror after the signing of a phase one trade agreement. If Europe takes its place as Trump’s main concern, things will be different. While European investment in the US UU. It increased by $ 226.1 billion in 2018, to $ 3.0 billion, the US trade deficit. UU. With the EU also reached a record that year. Tariffs on German cars, which would be much more difficult to transfer to consumers than a bottle of Dom Perignon or an A320 aircraft, remain an unpleasant prospect, even after an increase in their local production in the US. UU. During the last decade. Pray that the EU can convince the White House that an escalation in tariffs would damage US jobs, saddle the consumer with higher prices and deter hiring and investment. If that is not enough, then perhaps the next delegation sent by the EU should include Arnault and the gift of some handbags. Made in the USA UU. Of course.

To contact the author of this story: Lionel Laurent at [email protected]

To contact the editor responsible for this story: Melissa Pozsgay at [email protected]

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Lionel Laurent is Bloomberg’s opinion columnist covering Brussels. He previously worked at Reuters and Forbes.

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