"It's a question of how Beijing will respond to the EV tariffs. Is there going to be an escalation? I think yes. Is it going to go after luxury goods? I don't think so," said Patrice Nordey, CEO of Shanghai-based innovation consultancy Trajectry. This highlights a nuanced understanding of the trade dynamics where luxury goods might be spared in retaliation, given their significance in keeping luxury spending within China.
"When luxury goods sales are taking place in China, that means more tax revenue, and it's significant," he said. This has policy implications since fostering local spending is seen as beneficial for the economy, aligning with governmental goals to enhance domestic consumption.
"If there were a new fiscal environment that forced luxury brands to increase their price in China, it would create further incentive for Chinese consumers to make their luxury expenditures outside China, which is the opposite of what the government wants." This statement emphasizes the delicate balance of pricing strategies for luxury brands amid geopolitical tensions.
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