China has introduced tariffs on European brandy in retaliation to EU tariffs on Chinese electric vehicles.
- The Chinese government describes this move as an ‘anti-dumping’ measure to protect domestic producers.
- France, a major exporter of brandy to China, is expected to suffer significant economic impacts.
- Key luxury brands such as Hennessy and Remy Martin could face drastic reductions in sales and revenue.
- The European Commission plans to contest the tariffs at the World Trade Organisation.
In a recent move, China has imposed tariffs on European brandy, marking its retaliation against the European Union’s tariffs on Chinese electric vehicles. According to the Chinese commerce ministry, these tariffs are described as an ‘anti-dumping’ measure aimed at safeguarding domestic producers from significant harm posed by European imports.
The European Commission has expressed its intent to challenge these measures at the World Trade Organisation, labelling them an ‘abuse’ of trade defence regulations. French Trade Minister Sophie Primas, echoing similar sentiments, has characterised the brandy tax as retaliatory and ‘unacceptable,’ stating it is a breach of international trade rules.
France, which is responsible for 99% of brandy exported to China, stands to be severely impacted. Major French brands such as Hennessy and Remy Martin are expected to be hit hard, with industry experts predicting ‘catastrophic’ results. The French cognac lobby group BNIC has called upon French authorities and the EU to step in, emphasising that brandy producers are caught in a dispute unrelated to their industry.
The immediate response to the announcement saw a plunge in shares among luxury brands involved in brandy production. LVMH, the producer of Hennessy, experienced a drop exceeding 3% in share value, while Remy Cointreau, the manufacturer of Remy Martin, saw a decline of more than 8%. Analysts warn that the tariffs could provoke a 20% price increase for Chinese consumers, potentially leading to a similar decline in sales volumes and revenue for suppliers.
This conflict exacerbates existing tensions between the EU and China, following the EU’s decision to impose tariffs of up to 35% on Chinese electric vehicles. In retaliation, China has signalled potential further tariffs on other European products, including cars, pork, and dairy. The resulting uncertainty has also impacted shares in German carmakers like Volkswagen, Porsche, Mercedes-Benz, and BMW, who are concerned about being the next targets.
The unfolding trade conflict underscores escalating tensions between the EU and China, with potentially significant economic repercussions for both sides.
