Donald Trump’s trade war has shattered expectations for a US-driven recovery in the luxury market this year, as tariffs threaten to prolong a slump in demand for handbags and high-end watches.

The US and China, the twin engines powering global demand for luxury goods, have continued to ratchet up tit-for-tat import duties on one another’s products in a febrile trade dispute that risks severely undermining consumer confidence in the world’s two largest economies.

Analysts have responded by slashing growth forecasts across the industry. Bernstein this week forecast that the luxury sector would suffer a 2 per cent decline in revenues in 2025, reversing its previous prediction of 5 per cent growth because of heightened economic uncertainty and the increased likelihood of a global recession.