On Tuesday, following the European Union’s vote to impose a maximum tariff of 35.3% on electric vehicles (EVs) produced in China, the Chinese Communist Party announced that it would implement “temporary anti-dumping measures” on imported brandy from the EU.
The Chinese Ministry of Commerce stated in an announcement on October 8 that a preliminary investigation found that imported brandy from the EU was being dumped, causing “substantial damage threats” to the domestic brandy industry. As a result, starting from October 11, China will levy import guarantees of 30.6% to 39.0% on relevant brandy products from the EU.
This move by China is seen as a retaliatory measure against the EU’s imposition of tariffs on Chinese electric vehicles. Last Friday, EU member countries voted to impose a “counter-subsidy tariff” of up to 35.3% on Chinese electric cars.
In January of this year, the Chinese Ministry of Commerce announced an anti-dumping investigation into imported brandy from the EU. Prior to the EU’s tariff vote on Chinese electric vehicles, Chinese authorities claimed they had found dumping of brandy imports from the EU in a preliminary investigation but had not taken immediate action at that time. This was seen as an attempt by China to ease trade disputes with the EU.
According to reports from Reuters, France was one of the countries pushing for the EU to impose tariffs on Chinese electric vehicles. France is also considered to be the primary target of China’s retaliatory measures this time.
Last year, France exported brandy worth $1.7 billion to China, accounting for 99% of China’s brandy imports.
French luxury brandy labels like Hennessy and Remy Martin will be significantly affected, with importers needing to pay guarantees of 39.0% and 38.1% respectively.
These guarantees will increase the upfront costs for Chinese companies importing brandy from the EU, but the Chinese Ministry of Commerce has not yet detailed how and when Chinese importers can reclaim these guarantees.
Following the announcement, the stock prices of some well-known brandy brands dropped sharply. Pernod Ricard fell by 2.9%; Remy Cointreau dropped by 5%; and LVMH decreased by 4%.
The National Interprofessional Cognac Bureau (BNIC) in France, Pernod Ricard, and Remy Cointreau did not immediately respond to Reuters’ requests for comments.
According to a report by Voice of America (VOA), Sander Tordoir, a senior economist at the Center for European Reform (CER), stated that China’s intentions with this move are not yet clear.
Tordoir told VOA, “The European Commission followed World Trade Organization (WTO) rules when designing the anti-subsidy tariffs on Chinese electric vehicles. So, in principle, China does not have the right to retaliate, but that doesn’t mean Beijing won’t do so.”