What: China's 20% levy on offshore-trust back taxes is weighing on ultra-wealthy spending, while US luxury card spending fell for a third straight month in September, putting pressure on luxury brands' third-quarter results.

Why it is important: The tax measure hits China's ultra-wealthy, the segment that had held up best, and quiet-luxury labels are outperforming conspicuous brands. Growth is concentrating in fewer brands and categories, such as jewellery, which fits the selective recovery seen in LVMH's and Kering's second-quarter results.

China's tax crackdown on wealthy individuals has become the latest headwind for luxury brands, already dealing with the fallout from the Iran war and slowing US consumer spending. Wealthy Chinese who used offshore trusts to shelter assets have until October 22 to declare and pay years of back taxes under a 20% levy.

The levy is hitting ultra-high-net-worth spending, a group that had proved more resilient than middle-class consumers hurt by the property downturn. Chinese consumers account for roughly a fifth of global luxury purchases. Bernstein analysts note a sharp deceleration in summer mall data, while industry sources say quiet-luxury labels such as Brunello Cucinelli and Loro Piana are outperforming Louis Vuitton and Gucci.

In the US, Citi data shows luxury card spending fell for a third consecutive month in September. Kering has warned of a further contraction at Gucci, while high-end jewellery, including Cartier, remains a bright spot. LVMH reports on October 12, with analysts expecting sales of €18.5 billion ($20.7 billion), up 1%; Kering and Hermès report on October 22.

IADS Notes: China's luxury market was already narrowing before the tax measure: WWD reported in April 2026 that growth was going only to brands with sharp positioning and local relevance, as aspirational consumers retreated and domestic and accessible luxury brands gained share. Retailers were already adjusting, with Galeries Lafayette acknowledging in Fashion Network in April 2026 that its Beijing store may be oversized and that it would adapt rather than exit China. The summer's recovery signals were modest and uneven. WWD in July 2026 showed LVMH's fashion and leather goods returning to 1% organic growth after seven quarters of decline, while watches and jewellery rose 11%. WWD also reported in July 2026 Kering's first comparable sales increase in three years, with Gucci still down 2% organically and a dedicated China plan aimed at more selective, experience-driven consumers. Jewellery strength has also reached department stores: Liberty's jewellery sales rose 20% year on year, leading it to open a second jewellery hall (WWD, September 2026).

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