SHANGHAI, Oct 9 (Reuters) - European luxury shares have

slid on investor concerns that Hermes handbags and Dior

slingbacks may be Beijing's next targets for retaliation,

following the EU's decision to slap tariffs on China EVs, but

analysts say such a move is unlikely.

"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.

So far, moves by China in the ongoing tit-for-tat trade spat

with the EU have targeted brandy, pork and dairy, all of which

are major industries for France, which lobbied for tariffs on

Chinese-made EVs imported into the EU.

Shares of LVMH, which also markets high-end

Hennessy cognac, Hermes, Kering, Ferragamo

, and Burberry ( BBRYF ) dropped 2%-6% on Tuesday after

Beijing said it would impose temporary anti-dumping measures on

imports of brandy.

Jacques Roizen, managing director of China consulting at

Digital Luxury Group, said targeting luxury goods in China would

run counter to what has been consistently favourable policies

for luxury firms in the world's second-largest economy, where

Beijing is eager to keep more luxury spending, rather than see

its consumers splurge in overseas markets.

He points to the example of Hainan, which has been built

into a major duty-free hub largely due to the acknowledgement

from policymakers that luxury spending in China is good for the

country.

"When luxury goods sales are taking place in China, that

means more tax revenue, and it's significant," he said.

"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."

The size of the Chinese luxury market, even considering its

recent slowdown, is expected to account for 25% of the global

total this year, according to Jelena Sokolova, senior equity

analyst at Morningstar.

This helps to explain the reaction of European luxury shares

to every announcement that comes from China, she said, but also

means that even the threat of introducing tariffs or raising

domestic consumption taxes on imported luxury goods would hit

French luxury conglomerates where it hurts.

French brandy shipments to China reached $1.7 billion last

year and accounted for 99% of the country's imports of the

spirit, while 11 billion euros ($12 billion) in European luxury

goods were imported into China last year.

But the very size of the luxury goods industry might make it

a less likely target for Beijing, according to Albert Hu,

professor of economics at the China Europe International

Business School in Shanghai.

"I think at this point, neither EU nor China wants a full-

scale trade war that would hurt both economies," he said, adding

that China's relatively careful orchestration of retaliatory

targets thus far indicates Beijing is eager to continue

negotiating and working towards a compromise with Brussels.

The nature of the luxury goods industry also makes it

difficult for China to reasonably stand up claims about dumping.

"It's hard, logically, to justify that there is a case for

dumping $2,000 handbags," Sokolova said.

($1 = 0.9122 euros)