The Louis Vuitton owner cited delays related to a U.S.-France trade dispute, while the jeweler said the French giant was trying to leverage the protests against police brutality and the COVID-19 pandemic to seek a lower price.

Tiffany shares plunged as much as 11% in New York, while LVMH gave up gains to trade 0.3% lower in Paris.

The deal, struck in November 2019, ran into trouble after coronavirus-related lockdowns closed shops around the world and curbed international travel, hitting demand for luxury goods. Adding Tiffany was seen as a way for LVMH Chairman Bernard Arnault to bolster the French company’s U.S. presence by adding an iconic label known for its robin’s egg blue packaging.

Backing away from the deal would be a rare setback for Arnault, who built his empire through a string of acquisitions, amassing a conglomerate encompassing everything from Dior fashions to Dom Perignon Champagne. Tiffany offered a rare opportunity to gain a major brand in the jewelry market, which remains largely splintered among artisanal manufacturers, while other global names like Richemont’s Cartier are already owned by competitors.

Tiffany’s global net sales fell 29% in the quarter ended July 31, though that was an improvement from a 45% drop reported the previous period. The turmoil in the luxury market since the coronavirus spread had prompted speculation that LVMH would seek a lower price.

“It’s a great way out for LVMH,” said Keith Temperton, a trader at Lombard Forte Securities, in an email. “They had paid a top-of-the-market price ahead of the pandemic for Tiffany. It’s not surprising, their efforts to wriggle out of it.”

Deadline extended

The jeweler last month extended the deal deadline by three months, to Nov. 24, prompting LVMH to say it reserved the right to challenge the new closing date.

LVMH said the French government in a letter had asked the company to delay the deal beyond Jan. 6, 2021, citing a U.S. move to impose tariffs on French goods.

“It’s a governmental order—we have no other choice,” LVMH Chief Financial Officer Jean-Jacques Guiony said on a conference call Wednesday, adding that advisers told the company the government has the right to ask for a postponement.

After that comment, LVMH was forced to cut the call with Guiony short because of a technical problem. It’s scheduled to resume at 3:45 p.m. Paris time.

In July, the U.S. announced 25% tariffs on French goods including makeup, soap and handbags in a long-running battle over taxing global technology firms. The implementation of the levies was delayed for 180 days while France suspended collection of its digital services tax, which the U.S. says unfairly targets American firms.

A month before LVMH and Tiffany struck their deal last year, Arnault traveled to Texas to join President Donald Trump at a ribbon-cutting ceremony for a new Louis Vuitton factory, part of a plan by the French tycoon to hedge against trade tensions.

After reaching an agreement to buy the jeweler, Arnault described it as an “iconic, emblematic brand of America, with a great history,” and said the deal would boost its prospects in Europe and China.

Delaware suit

The government’s request to LVMH for a delay in the closing date has no basis in French law, Tiffany said.

The lawsuit, filed in Delaware, “refutes LVMH’s suggestions that it can avoid completing the acquisition by claiming Tiffany has undergone a material adverse effect or breached its obligations under the merger agreement, or that the transaction is in some way inconsistent with its patriotic duties as a French corporation,” Tiffany said.

The reason advanced by LVMH, notably the letter from the government, is “convenient,” but it’s not an “excuse you can invent,” Sanford C. Bernstein analyst Luca Solca said by phone.

The price LVMH would have to pay to walk away wouldn’t be a “very material amount,” Solca said. That’s because typically U.S. courts would look only at the negative impact for the company, not shareholders. The courts would probably assess the costs of the legal and financial advisers and any third party that advised Tiffany.