The Executive Briefing: Tariffs on Borrowed Time; Confronting Luxury’s Pricing Problem

Tariff Relief in Sight

What happened: At an early November hearing, a majority of the nine justices on the US Supreme Court appeared poised to severely curtail, if not entirely eliminate, most of the tariffs President Donald Trump has laid down since April.

Free trade makes a comeback: This would be welcome news for brands that have struggled to adapt to this new era of constantly shifting trade policy. The lack of stability around tariff rates has made it difficult to predict manufacturing costs. The uncertainty and inflation they’ve caused have similarly wreaked havoc on consumer demand forecasting, to say nothing of the devastating impact on garment workers in countries like India, which found itself with an unexpected 50 percent tariff this summer.

Or maybe not: While few outside the Trump administration would mourn the tariffs’ demise, the fashion industry was starting to get used to the new reality. Most of the more egregious tariffs had been negotiated down (Switzerland finally got its punishing 39 percent levy lowered to 15 percent last month, to the watch industry’s great relief). Price increases have been small, and consumers so far haven’t balked at paying them.

Trump is also unlikely to let the matter drop. Even an unfavourable ruling would leave him the power to apply some tariffs, and there are other levers he could pull to influence global trade flows.

Looking ahead: It’s been a constant refrain these last six months that it’s the uncertainty, rather than the tariffs, that has created the most anxiety in the fashion industry. While it may offer temporary relief, the Supreme Court may simultaneously touch off a new period of instability.

What Are Consumers Thinking?

What happened: Multiple measures of US consumer sentiment plunged in November, in some cases hitting near-record lows. And yet, retail sales continued their yearslong march higher.

Behind the numbers: These two indicators usually track closely, but the split is probably an illusion. One set of consumers — wealthy ones, mostly — is still shopping. The rest are telling pollsters they’re worried about their financial prospects. The first group has enough spending power to almost singlehandedly lift retail sales, while the second, much larger group is going to skew any sentiment survey sharply negative.

Special K: This is confirmation of what economists call the “K-shaped” recovery from the pandemic. It’s what convinced luxury brands they could dramatically hike prices beyond what all but their wealthiest customers could afford. And it’s why off-price retailer T.J. Maxx is thriving, raising its outlook after strong earnings last week.

What comes next: But brands are having to work harder to hold even the big spenders. This is true not just for luxury brands (more on that in the next item), but for mid-priced retailers like Abercrombie & Fitch and Gap. Where they once relied on discounts to draw customers, they are now equally focussed on signalling value through unique products and compelling ads. The mini trend this holiday season of nostalgic, traditional marketing is a prime example; these may be mass-market chains, but they’re also family.

Big Luxury’s Big Decision

What happened: Luxury brands started to confront the thorny question of how to grow sales now that raising prices is off the table.

After the price hikes: A small number of brands can still cater exclusively to the ultra-wealthy. But if you’re not Hermès, you must thread the needle of winning back at least a few aspirational shoppers without diluting your brand. Kering chief executive Luca de Meo in a leaked internal memo talked of rethinking pricing and assortment, and introducing small (relative to Gucci, at least) brands like Bottega Veneta and Balenciaga to wider audiences. Kering appears to be taking a more radical approach with its struggling McQueen label, planning to close stores and introduce products at lower price points.

At BoF VOICES 2025, Prada Group CEO Andrea Guerra took a different approach, telling BoF editor-in-chief Imran Amed “if we’re talking about prices, we have failed on other issues.” He made the case that, if a brand and its products are creative and innovative, they will find their customer, whatever the price.

The middle path: Most brands are struggling to find a path to become less expensive without diluting their image. Burberry has been more radical, embracing a more accessible — in every sense — branding that is more heritage than high fashion. The strategy is working, with the British label reporting sales growth for the first time in two years in its most recent quarter. But it has a uniquely utilitarian, British perspective on luxury and a recent past as a premium brand: couture houses like Dior aren’t likely to use it as a benchmark.

This Month in AI

What happened: OpenAI, Google and others rolled out more and better e-commerce tools just in time for Black Friday, even as talk of an AI bubble gathered steam.

Shopping assistants: Google released AI-powered price monitoring and the ability to have Gemini call stores to check on a product’s availability. OpenAI introduced a “shopping research” tool and added Target to its growing list of retailers that allow shoppers to make purchases through ChatGPT. They join chatbots and AI stylists offered by individual brands and retailers, as well as a crowded field of shopping apps that use the technology.

First talk, then action: AI won’t be driving too many sales this holiday season, but this might be the last year we’ll be able to say that. The flywheel effect is powerful here: If shoppers trust AI to inform their purchasing decisions — and survey after survey shows they already do — then it’s not such a leap to let it handle the actual transaction too. If agentic AI is adopted at the same pace as mobile commerce in the 2010s, it could reach up to 18 percent of all online sales, or $5 trillion, by 2030, according to The State of Fashion 2026 report by McKinsey & Company and BoF Insights.

Is this a good thing for brands? They need to be where customers are, which is increasingly LLMs. But at the same time, how many times does the fashion industry need to learn the lesson of what happens when you hand your customer relationship over to a third party? It’s no coincidence that Amazon is the biggest holdout blocking access to ChatGPT’s shopbots.

About that bubble: November saw a marked increase in volatility in AI stocks, as investors grew nervous about the immense sums being thrown at a technology that has yet to prove its value at scale. The tech-heavy Nasdaq fell about 7 percent in the first three weeks of November before mounting a partial recovery last week.

The bigger worry for fashion is not that AI’s shopping applications fail to live up to potential, but that the AI-driven stock market rally comes to an end; rising share prices have been a key driver – some say the key driver – of retail sales.

Can Shein Be Stopped?

What happened: France suspended Shein from operating its marketplace within its borders, then lifted the ban, then a few weeks later proposed a three-month blanket suspension. The European Union and UK both took steps towards taxing low-value imports, attacking a pillar of the ultra-fast-fashion business model.

Drawing a line: The reason given for France’s suspension was the availability of weapons, childlike sex toys and other illegal items for sale on the marketplace. These are serious allegations, but there is a sense that if it wasn’t this, it would have been something else.

Shein is facing growing opposition around the world as it gobbles up an ever greater share of consumers’ fashion spending. The EU and UK are following the US in closing the “de minimis” loophole that allows Shein to avoid tariffs, making those shockingly low prices possible (though the UK last week said its exemption will potentially live on until 2029). France and Italy have an incentive to take more extreme steps to protect their giant homegrown fashion sectors.

And yet: Shein is striking a defiant pose, predicting that it will generate $2 billion in profit this year. The new taxes aren’t a silver bullet; Shein’s sales in the US are down, but not catastrophically so, and Temu mounted a campaign this fall to win back market share in America. In France, as ministers denounced Shein’s online marketplace, thousands of shoppers lined up to experience the company’s first permanent brick-and-mortar store, in the heart of Paris.

Time will tell: The real tell is whether Shein proceeds with a Hong Kong IPO. The company filed to go public in July, but there have been few updates since. Moving forward would force Shein to offer more definitive answers as to how it will respond to an increasingly global campaign to rein it in. Even knocked down a peg, Shein remains a major threat to the rest of the fashion industry.