Image: Gucci

Fashion has, for the most part, been left out of Donald Trump’s trade war with China so far. It has benefited from the administration’s attempts to avoid slapping import taxes on the most consumer-facing goods, which has been a priority (for obvious reasons), but that does not mean that luxury good makers are not increasingly being brought into the fray. Beyond “Made in China” handbags being included on one of the latest lists of proposed tariff items, analysts are predicting that the U.S.-China trade war stands to hit luxury goods companies where it hurts: Their stock prices.

Paris-based conglomerates like LVMH and Kering have found favor amongst consumers for their pricey – but heavily consumed – accessories and footwear, making them investor favorites, with shares reaching, and staying at, near record highs. But just because most of these “luxury” products do not tend to be made in China (at least not according to their labels) does not mean that their parent companies will be able to sit on the sidelines of Trump’s war, unscathed.

According to Reuters, “Even though luxury firms are not as directly threatened by rising protectionism as carmakers and industrial companies,” they are not immune from “the possible trickle-down effect of tit-for-tat tariffs hikes on consumers, [which] is adding to jitters over heady valuations.” The publication states that “the escalating trade war between the United States and China could abruptly end a glittering stock market run for luxury goods firms,” and some investors have “already put off by lofty valuations in a sector powered by shoppers in the two countries.”

For instance, David Keir, co-manager of the Saracen Global Income and Growth fund, confirmed that the Edinburgh-based fund dropped its LVMH holdings last year and ridded itself of German suitmaker Hugo Boss early last month. “There’s an incremental risk from the great unknown of trade tariffs,” he told Reuters, going as far as saying that right now, companies in the luxury fashion sector “bad investments.”

No shortage of views coming out of Seeking Alpha’s investor contributor community seem to share the same view. “Wide diversification makes LVMH resistant to changes in trends and consumer behavior,” thereby, making it an attractive buy, the investment research platform stated this week. However, it cautioned, “in times of uncertainty associated with trade wars, luxury goods manufacturers are becoming an excellent investment option.”

To date, the potential decrease in confidence in the U.S. and Chinese luxury markets – two of the top performers in the world – has not been reflected in terms of significant stock price drops, but that does not mean it is not coming. In fact, UBS analysts predict that share prices could fall as much as 30 percent in the event of a fully-fledged trade war.

That is something that big-name creative directors, buzzy streetwear collaborations, and luxury’s growing willingness to make its products available online can fix.