China has imposed temporary anti-dumping measures on brandy imports from the European Union in response to the EU’s vote for tariffs on Chinese-made electric vehicles. The Chinese Commerce Ministry stated that dumping of brandy from the EU is threatening China’s own brandy sector with substantial damage. Additionally, the ministry hinted at potential further measures by mentioning an ongoing investigation into EU pork products and a possible increase in tariffs on imports of large-engine vehicles, which would primarily impact German producers.
Importers of brandy from the EU will now have to pay security deposits ranging from 34.8% to 39.0% of the import value starting from October 11. France, which accounted for 99% of China’s brandy imports last year, seems to be the target of Beijing’s investigation due to its support of tariffs on China-made EVs. Major brands like Hennessy and Remy Martin will be heavily impacted by the security deposit requirements, making it more expensive upfront to import brandy from the EU. However, it is unclear how and when importers will be able to get back their deposits.
Following the announcement of the anti-dumping measures, shares in Pernod Ricard, Remy Cointreau, and LVMH, owner of Hennessy, all experienced declines in their stock prices. Companies that cooperated with the Chinese investigation were subject to a lower security deposit rate of 34.8%. French cognac trade body BNIC, Pernod Ricard, and Remy Cointreau did not immediately respond to requests for comments on the matter. The punitive measures against EU brandy imports come in response to the EU’s decision to adopt tariffs on China-made EVs.
The Chinese Commerce Ministry had previously suspended anti-dumping measures on EU brandy as a goodwill gesture, despite finding that EU brandy had been sold in China at below-market prices. The EU had set tariff rates ranging from 7.8% to 35.3% on China-made EVs, in addition to the standard 10% car import duty. The European Commission expressed willingness to negotiate an alternative even after the tariffs are imposed. The Commerce Ministry of China found that European distillers had been selling brandy in the Chinese market at dumping margins between 30.6% and 39%, leading to damage to the domestic industry.
Overall, the trade tensions between China and the EU are escalating as retaliatory measures are imposed on brandy imports from the EU in response to tariffs on China-made EVs. The potential for further measures on EU pork products and large-engine vehicle imports indicate a broader trade conflict between the two economic powerhouses. The impact of these measures on major brandy producers and the automotive industry, particularly in Germany, remains to be seen. The European Commission’s willingness to negotiate suggests that there is still a possibility for resolution through diplomatic channels.
