Chinese Consumers Shun Tiffany & Co. Amid Trade War

Tiffany & Co. store
The logo of U.S. jeweller Tiffany & Co. is seen at a store at the Bahnhofstrasse shopping street in Zurich, Switzerland October 26, 2016. (Photo: REUTERS/Arnd Wiegmann/File Photo)

Luxury brand Tiffany & Co. revealed that it saw a significant sales decline in tourist spending, particularly among Chinese travelers amid the escalated China-U.S. trade war. Analysts are expecting the luxury sector to suffer further following Beijing's Tuesday warning against U.S. trips.

According to CNBC, luxury jeweler Tiffany & Co. said foreign tourist spending was "dramatically" low for the first quarter of this year. The decline in sales hit 25 percent, with the company confirming that weak spending was "sharper for Chinese tourists."

Industry analysts noted that Tiffany's disappointing quarter is just one of the many implications of how the Chinese people have a deep sense of patriotism. They are willing to go the extra mile to uplift the country they love - even if it means giving up on some of their favorite brands.

Unfortunately, Tiffany & Co. was dragged into the trade dispute that escalated shortly after the U.S. government blacklisted Huawei from collaborating with American companies. With Tiffany in the midst of the broken trade deal, analysts have predicted that the U.S. luxury sector will gradually be impacted in a negative sense.

Weak foreign tourist sales are a huge let down for Tiffany but Chief Financial Officer Mark Erceg said tariffs on exports to China also affected overall sales for Q1. He added that "our decision to not meaningfully increase our retail prices in China at the present time" had an impact on the sales figures.

Late in May, American business owners in China expressed concerns about the heat they have been receiving ever since the U.S. government accused Beijing of backtracking on the now-stalled trade deal.

A survey by the American Chamber of Commerce in Shanghai indicated that the trade war was heavily hurting U.S. businesses in China. 42 percent of the respondents said manufacturing costs increased. Over half of the participating business heads said demand declined.

While many U.S. businesses have felt the brunt of the trade war, the Federal Reserve said it is willing to slash interest rates in efforts to curb the damage brought about by the dispute with Beijing.

Federal Reserve Chairman Jerome Powell's announcement about potential interest rate cuts amid the trade tensions with China drove up hope in the stock market. Dow saw gains of over 500 points. Nasdaq and S&P also increase by over two percent following Powell's declaration.

It remains to be seen how long American stocks can hold up the positive trends of this week as the tariff and consumer threat on tourism and luxury segments loom.

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