Made in America: A Deal-Breaker for Luxury Retail?

The luxury market, globally valued at approximately US$382.2bn, relies heavily on European craftsmanship, but a looming trade war is pushing brands to rethink their supply chains.

European luxury goods have avoided new US tariffs for now, but US President Donald Trump says levies "will definitely happen."

Meanwhile, the European Commission promises a "proportionate" response, raising concerns for high-end brands.

While some may pass costs to wealthy clients, luxury consumers are already frustrated by price hikes.

Another strategy, suggested by The Wall Street Journal, involves shifting some production to the US. While details remain unclear, luxury brands are at risk, just as the American market becomes increasingly important.

The US market is still recovering after a prolonged slump, with American consumers just starting to spend again, meaning luxury brands are reluctant to push them away.

Some are considering a more strategic approach by moving some production to the US. This would allow brands to avoid tariffs entirely and could even cut costs.

Furthermore, energy prices in the US are significantly lower than in Europe and some states offer subsidies for manufacturers that create local jobs.

Luxury brands already outsource production, though they typically stay close to home. Bain & Company reports that 55% of global luxury goods are made in Italy, largely in independent factories supplying major brands. Moving to the US would be a significant shift, but it may be necessary to stay competitive.

Does 'Made in America' matter for luxury shoppers? 

Brand heritage is central to luxury marketing and a "Made in Italy" or "Made in France" label adds prestige. Plus, some luxury products must be produced in specific regions—Champagne from France, Swiss watches from Switzerland. 

However, for many high-end brands, manufacturing location is more flexible.

For luxury brands outside the ultra-exclusive tier—where European craftsmanship is non-negotiable—moving production stateside may be a practical solution in an era of protectionism.

What does ‘Made in America’ really mean?

President Trump promotes the "Made in America" label as a symbol of national pride, contrasting with overseas manufacturing.

However, the Federal Trade Commission (FTC) sets the standard, stating that a product must be “all or virtually all” made in the US to qualify. This means that significant materials, processing and labour must originate from America. 

Yet enforcement is weak. Companies do not need FTC approval before making "Made in USA" claims and monitoring violations is difficult.

The only industries required to disclose US content are automobiles and textiles. In other sectors, honesty depends on self-reporting.

Luxury brands must navigate these regulations carefully. If an item’s final assembly happens in the US but key components come from abroad, it cannot carry a "Made in USA" label.

Supply chain transparency is crucial

Jeanne Carver, Founder of Shaniko Wool Company, highlights the challenge: “Even if [businesses] know where the fabrics came from, they may not know who made the yarns to make the fabrics and they certainly may not know where the fibre [to make the yarn] came from.”

For many brands, a fully American-made product is unrealistic due to the country’s limited manufacturing infrastructure.

As Colleen Tuohy of Wyatt Outdoors explained to Modern Retail, her brand’s wool garments are cut and sewn in the US but use Australian wool. The labels reflect this distinction: "Made in America of Australian wool."

Some experts suggest a clearer designation. For example, Sam Vise, CEO of Optimum Retailing, argues that “assembled in America” would better reflect today’s global supply chain. The FTC also endorses this phrasing for products like “a couch assembled in USA from Italian leather and [a] Mexican frame.”

Sam adds that adopting this language acknowledges “the contributions of trading partners that often purchase as much from the US as the US purchases from them.”

In an evolving manufacturing landscape, brands must balance transparency, cost-efficiency and consumer perception as they navigate the complexities of global trade.

If tariffs push costs up further, luxury brands must find new ways to protect both their margins and their reputations.

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