The $10K Handbag Hoax? TikTok's Trade War Puts Luxury ETFs In The Hot Seat

As geopolitical tensions between China and the U.S. rise and viral videos on TikTok expose layers of luxury supply chains, investors are facing a new type of reckoning: brand dilution by exposure. While some luxury brands are gearing up to pass the cost on to affluent customers, others may be at risk of reputational damage and shifting consumer sentiment, particularly those with undisclosed connections to Chinese manufacturers.

For luxury retail ETFs, the narrative is no longer merely one of premium brand cachet. It’s one of origin transparency, tariff risk and the danger of counterfeit inundating mainstream markets.

3 Luxury Retail ETFs Under The Microscope

SPDR Select Sector Fund – Consumer Discretionary XLY

As one of the largest and most liquid ETFs in the space, XLY includes mega-cap names like Home Depot HD and Nike NKE. While not exclusive to luxury, it offers heavy exposure to branded discretionary spending. If consumer sentiment shifts against companies perceived as outsourcing to China or overcharging for imported goods, XLY could be vulnerable to sector-wide repricing.

As CNN notes, lots of luxury products are partially assembled in China and then receive final touches in Europe.

Amplify Online Retail ETF IBUY

Targeting U.S. consumer and e-commerce platforms, IBUY features brands that are most exposed to the ascendance of wholesale Chinese apps such as DHgate and Taobao. According to CNN, the platforms are now dominating app store rankings in the U.S., offering ultra-low-cost facsimiles that impersonate (or purport to be) OEMs for luxury brands such as Gucci, Prada and even Birkin.

Wang Sen, a TikTok personality who stated he was an OEM for high-end handbags, was caught on camera facing a wall full of what appeared to be Birkin bags. In a now-deleted video, he asked viewers to reach out and purchase directly from them, as reported by CNN. Real or not, the effect is the same: IBUY constituents are being competed against by direct-from-factory sellers encroaching on their territory.

First Trust Consumer Discretionary AlphaDEX Fund FXD

This ETF comprises high-end U.S. consumer brands like Ralph Lauren RL and Nike – companies often cited in viral videos as sending manufacturing offshore to China. If sales of these companies take a hit as consumers shift to direct purchasing, this fund is likely to feel the pain.

Also Read: BlackRock Debuts First 3% Capped S&P 500 ETF To Tame Mega-Cap Dominance

The TikTok Trade War

What’s behind this viral content bonanza is more than transparency—there’s a larger trade war narrative. In a new twist on U.S.-China tensions, CNN explains that Chinese influencers are flooding TikTok to pressure Americans to bypass Trump’s 145% tariffs by purchasing directly from Chinese manufacturers. One video purporting to document the suppliers of Lululemon leggings has over 1.5 million likes. In comments? “Now this is how you do a trade war.”

Apps such as Taobao and DHgate, notorious for carrying “dupes,” burst into the U.S. App Store’s top 10 this month. Even if they are not selling original OEM products, they still undercut the prestige and price power of luxury brands.

A popular video cited by the outlet showed a user saying Lululemon’s $98 leggings were purchased for $5–$6 from a factory in Yiwu. Lululemon quickly dismissed any connection to those manufacturers, stating the names does not appear on its formal 2025 list of suppliers.

Luxury groups, however, are adapting. French luxury brand Hermès indicated that it would pass the total cost of US tariffs to buyers, according to Reuters. The French luxury group, known for its Birkin and Kelly handbags, which sell for $10,000 or more, generated a 7% year-over-year increase in Q1 revenues on a constant currency basis, falling short of the almost 10% surge that analysts had estimated, according to HSBC data cited by Reuters.

Hermès can count on its high-end clientele to swallow higher prices, but not everyone in the industry enjoys such pricing power. LVMH, a bellwether, saw a 5% decline in its fashion and leather segment.

The Illusion Of Reshoring

While the Trump administration is counting on tariffs to restore manufacturing to U.S. shores, the situation is more complicated. A recently released CNBC Supply Chain Survey revealed that 74% of firms identify cost as the main obstacle preventing them from reshoring. Few are contemplating returning to America. Most prefer to move to other low-tariff nations such as Vietnam and Cambodia.

This implies that ETFs with U.S. luxury and consumer brand exposure will continue to be tied to impenetrable global supply chains—most of which are still routed through China.

Final Word For Investors

For investors in ETFs, the actual concern might not be where things are produced, but whether companies are honest about it. The viral TikTok clips, grounded in reality or not, have highlighted a building consumer desire for authenticity in labeling and sourcing.

High-end brands that fail to satisfy this expectation can risk more than just their reputations. They stand to lose their price power, their exclusivity, and ultimately, their appeal to investors.

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