Just because they sell $5,000 handbags and $20,000 watches doesn't mean it will be smooth sailing in the era of Trump tariffs for the world's largest luxury goods companies.

It may be anything but smooth, if JPMorgan analyst Chiara Battistini is right.

"The new import duties are worse than what had been anticipated, and a material headwind to the sector, that generates 20-25% of sales on average in the US, fully exports from Europe, with no flexibility to shift some of the production capacity to North America, and with pricing power that is increasingly questioned," Battistini wrote in a note on Friday.

Trump's severe tariffs have called the profit outlook for almost every company and sector into question.

President Trump unveiled a baseline tariff rate of 10% that will go into effect on April 5.

A higher tariff rate will start on April 9 for about 60 countries that the administration considers to be the worst trade offenders.

Read more: What Trump's tariffs mean for the economy and your wallet

Europe, where many luxury goods giants such as LVMH (MC.PA), Kering (KER.PA), and Burberry (BRBY.L) manufacture their goods, was hit with a 20% tariff.

The Kraneshares Global Luxury Index ETF (KLXY) declined by 10% this past week, worse than the MSCI Europe Index's drop of 4%. The ETF counts LVMH, Kering, and Moncler (MONC.MI) as top holdings.

The sector will not only see their cost of goods sold rise meaningfully but also face rising odds of a US recession — suggesting a pullback in demand even among high-income consumers.

"Beyond the margin pressure short term, we are even more mindful that the impact from the announced tariffs will also likely translate into a headwind to the underlying demand, in both the short term (due to higher level of uncertainty and stock market volatility, usually both impacting consumer confidence) and medium term (due to likely rising inflation," Battistini wrote.

Read more: How to protect your money during economic turmoil, stock market volatility

JPMorgan's research shows luxury goods players are already jacking up prices to compensate for the anticipated costs of tariffs.

Ferragamo (SFER.VI) raised the price of its Hug handbag by 4% and its elasticated ballet flat shoes by 6% both in the UK and France within the last week.

The Hug handbag now sells for $3,100, while the elasticated ballet flats fetch $695.

The company also raised the price of the elasticated ballet flat shoes by 3% in China and by 8% in Japan last week, JPMorgan's research found. The price of Hug handbags went up by 3% in Japan as well.

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"The aspirational consumer is going to be in hibernation as the impact of February/March Challenger job cuts report planned layoffs start to hit," Tematica Research chief investment officer Chris Versace told me.

JPMorgan's Battistini warns Swiss watchmakers could be hard hit given a possible demand pullback and already competitive market dynamics.

Versace said, "Those costs into the US are going to move meaningfully higher — so much for a new Rolex, despite all the new models they just unveiled."

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email [email protected].

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