European luxury stocks opened sharply lower after former President Donald Trump threatened new tariffs on EU imports, reviving transatlantic trade fears. Shares of LVMH, Richemont, and Brunello Cucinelli fell between 2% and 4%, underperforming broader markets as investors braced for potential U.S. duties that could curb discretionary spending.

The sector’s sensitivity stems from its heavy reliance on U.S. consumers, who account for a significant portion of revenue for brands like Louis Vuitton and Dior. Goldman Sachs downgraded LVMH to "equal-weight," citing limited valuation upside despite strong brand momentum, while warning that tariff uncertainty and foreign exchange moves could pressure 2026 earnings.

With China’s demand already uneven and global growth slowing, additional trade barriers threaten to compound existing headwinds. Investors now watch for concrete policy moves from Washington and how luxury houses adjust pricing or supply chains. The episode underscores how geopolitical tensions can swiftly impact high-end consumer goods, a sector prized for its resilience but vulnerable to trade wars.