China’s tax crackdown piles pressure on luxury brands as US spending falters

China has introduced a tax crackdown on wealthy individuals, adding to the list of challenges facing luxury brands. This comes amid concerns over slowing consumer spending in the United States. The sector, already reeling from a three-year slowdown, now faces further pressure. Shares in luxury giants LVMH and Hermes have dropped around 40% this year, trading near multi-year lows, while Kering's value has fallen by 29%.

China's wealthy consumers, who contribute significantly to the global luxury market, now face back taxes and a 20% levy, which may impact their spending. Industry experts believe this could dampen third-quarter results, reinforcing fears about the sector's recovery prospects. Despite some brands, like Brunello Cuccinelli and Loro Piana, showing resilience, the overall outlook remains cautious.

The impact of these tax measures may soon be felt as investors await quarterly reports from key players like LVMH, Kering, and Hermes.