China Imposes Retaliatory Tariffs on European Brandy

China will begin imposing additional tariffs on European brandy starting October 11, as a reaction to the European Commission's recent decision to proceed with tariffs on Chinese electric vehicle imports. The Chinese Ministry of Commerce announced on Tuesday that it would implement provisional anti-dumping measures on brandy imports from the European Union. These measures will require importers to pay security deposits at Chinese customs from this Friday onwards. According to the Ministry's statement, the investigation into European brandy began on January 5, 2023, and concluded that the product was being sold in the Chinese market at dumping margins ranging from 30.6% to 39%, posing a significant threat to the local Chinese brandy industry.

Initially, at the end of August, Chinese authorities had stated that they would not impose provisional duties, despite finding evidence of dumping. However, the situation changed after the European Commission decided to advance its plans to impose tariffs on Chinese electric vehicle manufacturers, which Beijing sees as a retaliatory move. The new measures will apply to all European brandy imports, affecting primarily French products such as cognac and armagnac. Importers of these spirits will be required to make deposits equivalent to the 35% average tariff level announced on August 29. This has caused concern among French producers, especially those in the cognac sector. The Bureau National Interprofessionnel du Cognac (BNIC), which represents French cognac producers, has called on the French government to intervene, stating that the industry has become a "hostage" of a broader trade dispute between the European Union and China.

The new tariffs come at a time of heightened trade tensions between the EU and China. The conflict escalated after Brussels launched a nine-month investigation into Chinese electric vehicles, which concluded that the Chinese automotive industry was receiving substantial state support, thereby distorting competition in the European market. In response, the European Commission proposed varying levels of tariffs based on the extent of state aid provided to different manufacturers: 7.4% for BYD, 20% for Geely, and up to 38.1% for SAIC. Western carmakers operating in China, such as Tesla and BMW, would face a 21% duty. The proposed tariffs have drawn mixed reactions in Europe. France has backed the measure, calling it "proportionate and calibrated," while Germany has expressed concerns about the potential impact on its automotive industry.

China's decision to implement these provisional tariffs on European brandy is being viewed as a direct response to the EU's actions against Chinese electric vehicles. The BNIC has warned that these new duties could have a devastating impact on the French brandy sector, a major exporter to China. The BNIC is urging French authorities to protect the industry, stating that the escalating trade conflict puts French producers in a precarious position over an issue they had no part in creating. According to the BNIC, the tariffs could severely damage both the brandy producers and the regions in France that rely heavily on brandy exports.

Although the current measures are provisional, China has indicated that it could impose permanent tariffs on EU spirits as soon as the European Union formally enacts its own tariffs on Chinese electric vehicles. This could happen as early as the end of October. If these tariffs are implemented, they would signal a deepening of the trade conflict between China and the EU, potentially impacting not only the brandy sector but also a range of other industries on both sides. As it stands, French producers, especially those in the premium cognac segment, are bracing for significant losses in one of their most lucrative markets.