China decided on Tuesday to impose temporary anti-dumping measures on cognac imports from the European Union. The countermeasures came shortly after the 27-nation bloc imposed tariffs on Chinese-made electric vehicles (EVs).
China’s Ministry of Commerce announced that an investigation had found that the dumping of brandy from the European Union threatened to cause “significant damage” to its industry.
The Chinese ministry said in a statement that it would make “objective and fair” decisions when the ongoing anti-dumping and anti-subsidy investigation into EU pork products is completed.
The ministry also said it was considering raising tariffs on imports of large motor vehicles, which would hit German manufacturers the hardest. German exports of vehicles with engines of 2.5 litres or more to China reached $1.2 billion last year.
The ministry announced that from 11 October, importers of cognac from the EU will have to pay a deposit of between 34.8% and 39.0% of the import value.
France was seen as a target of Beijing’s brandy investigation because of its support for tariffs on Chinese-made electric vehicles. Brandy shipments from France to China reached $1.7 billion last year, accounting for 99% of the country’s alcoholic beverage imports.
This announcement clearly shows that China is determined to tax us in response to European decisions on electric vehicles,’ French cognac producers’ group BNIC said in an emailed response to Reuters, adding that everything must be done to prevent the imposition of tariffs.
French President Emmanuel Macron told a conference in Berlin last week that China’s cognac probe was unfounded, while tariffs on electric vehicles were necessary to maintain a level playing field, describing Beijing’s investigation as ‘pure retaliation’.
The EU Commission did not immediately respond to a request for comment.
Stock falls
Hennessy and Remy Martin, owned by LVMH, were among the brands most affected by the measures, with importers having to pay deposits of 39.0% and 38.1% respectively.
The deposits will make it more expensive to import spirits from the EU. However, these deposits may be refunded if an agreement is reached before the final tariffs are imposed.
Shares in Pernod Ricard fell by 4.2%, Remy Cointreau by 8.7% and Hennessy owner LVMH by 4.9%.
Companies that cooperated with the Chinese investigation were subject to a 34.8% penalty, while Martell had the lowest penalty at 30.6%.
Pernod Ricard, Remy Cointreau and LVMH did not immediately respond to requests for comment.
Jefferies analysts said the measures could mean a 20 per cent price increase for Chinese consumers and a 20 per cent reduction in sales volumes.
Remy’s sales, which are most exposed to the Chinese market, could fall by 6 per cent, while Pernod Group’s sales could be hit by 1.6 per cent, they said.
Luxury goods stocks fell as much as 7 per cent on Tuesday, with one trader attributing this to fears that the sector, which is heavily dependent on China, could see the next round of trade measures.
The spirits measures follow the EU’s decision to impose tariffs on Chinese-made electric vehicles by the end of October.
Before the vote in late August, China had suspended its planned anti-dumping measures on EU brandy, ostensibly as a goodwill gesture, even though it had found that EU brandy was being sold in China at below-market prices.
At the time, the Ministry of Commerce said the investigation would end before 5 January 2025, but that it could be extended.
China’s Ministry of Commerce previously said it had found that European distillers were selling brandy at a dumping margin of between 30.6% and 39% in the consumer market of 1.4 billion people, causing damage to the domestic industry.
In the EU’s decision to impose tariffs on Chinese-made electric vehicles, the bloc set tariff rates ranging from 7.8% for Tesla to 35.3% for SAIC and other manufacturers deemed uncooperative in its investigation. These rates are in addition to the 10 per cent car import duty.
The European Commission said it was willing to pursue alternative negotiations even after the tariffs were imposed.
