Trump tariffs are increasing the price of shopping for luxury goods in the United States.
In late July, the administration imposed a 15% tariff on goods imported from the European Union, hitting popular luxury items like French perfumes, high-end face creams, designer clothing and handbags.
To sidestep these higher costs, some Americans are considering a different approach: traveling abroad to shop directly in Europe. But does this strategy actually make financial sense?
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Traveling as a strategy to avoid luxury goods tariffs
The idea is an interesting one, and it makes sense on paper. A $12,000 Rolex watch costs $16,680 under the 39% tariff instituted on Switzerland. That $4,680 tariff fee is more than enough to cover airfare and a hotel stay for a trip.
And that’s just one item. Shoppers who pick up multiple watches, handbags, or designer clothes could save thousands by buying abroad.
Many are pairing these shopping trips with vacations — skiing in the Swiss Alps, touring France’s museums or visiting Abu Dhabi. Credit card travel rewards can help further cut costs, and savvy travelers can find other ways to save once overseas.
The VAT refund in Europe
Traveling to Europe can be a particularly good deal. Americans who buy luxury goods in Europe and then transport them back to the United States may qualify for a value-added tax (VAT) refund. A VAT refund can often be more than 15%, and is issued for exported goods.
A VAT refund helps American buyers in several ways. Not only does it help keep an item’s price down, but that reduced price means that the tariffs will be reduced, since the item’s declared value will be lower. The VAT refund can help offset tariffs paid on the goods.
If you want to claim a VAT refund, start by reading the rules and details for the country you’re visiting. Some countries require your purchase to be above a certain amount, and the percentage of the refund varies, too.
You’ll usually need to buy all of your items at a single retailer, so shop around and strategically plan where you want to spend your money. Make sure that the retailer participates in the refund process, and have them fill out the refund document before you leave.
Keep the paperwork and your original sales receipt, and have the refund processed at the airport. You may need to present the goods, and they must still be unused to qualify. Be sure to leave extra time in your schedule to complete the VAT refund process.
Potential hangups with the plan
Travelers can’t necessarily avoid paying tariffs on luxury goods by traveling abroad to buy them, though some may conceal the items or state that they already owned the items when they left the United States.
According to U.S. Customs and Border Protection, anything that travelers bring back with them to the United States that they didn’t have when they left the country must be declared.
During that declaration process, items would be subjected to tariffs based on their value and their country of origin. If travelers fail to declare items, they could face serious consequences, including having the goods seized. Travelers may have to forfeit the goods, pay fines, and potentially face other legal action.
Does it make sense to travel to avoid luxury goods tariffs?
Traveling to buy luxury goods doesn’t mean you can necessarily avoid tariffs altogether, since you’re still legally obligated to declare the items that you purchased overseas. But the VAT refund in Europe can help you save money and can reduce the items’ declared value, so you’ll pay less in tariffs.
Making a trip exclusively to shop may be financially worth the cost on paper, but you’ll get more value out of it if you combine it with a trip made for entertainment. If you’ve been planning to take a trip overseas and will be spending on travel anyway, you might just combine it with some shopping to maximize the return you get on your travel expenses and airfare.