Tariffs Boost Number of Americans Buying Luxury Goods in Europe

Tariffs have reportedly led to an increase in the number of wealthy Americans traveling to Europe to buy luxury goods.

Some consumers make these trips to avoid paying tariffs—although they are supposed to declare their purchases to customs agents upon their return to the U.S.—while others pay the tariffs and still come out ahead due to other savings, CNBC reported Wednesday (Aug. 27), citing interviews with consumers and travel advisors.

While travelers are required to declare the items they purchased abroad, it’s hard for customs agents to determine if clothing worn by a traveler, for example, is new, according to the report.

Even those who declare their purchases and pay the tariffs can end up paying less than they would in America due to favorable exchange rates, lower base rates for merchandise and the ability to get a refund on the VAT tax paid in Europe, the report said.

The savings may or may not cover the cost of the trip, but in any case, the traveler gets the experience as well as the products, per the report.

It was reported Aug. 3 that overall, the luxury sector is being hurt by tariffs and a decline in tourism in Europe. LVMH, Prada and Moncler all said they were dealing with a decline in American travelers in the region.

LVMH Chief Financial Officer Cécile Cabanis said changes in tourist spending patterns were a reason why sales at the company’s fashion and leather goods division fell 9%.

In June, it was reported that American travelers were delaying or scaling back their vacations due to the uncertain economic climate.

However, the largest pullback on travel spending came from lower-income consumers. Wealthier consumers only marginally curbed their spending, so businesses like luxury hotels were mostly insulated from the dip in travel.

At the same time, some luxury brands have more power than other brands to increase prices when dealing with U.S. tariffs. It was reported in July that different sorts of companies have different approaches, depending on how much they think they can pass onto shoppers without impacting sales.

Middle and higher-income consumers might be more likely to spend on higher-priced discretionary items.