China Imposes Tariffs on European Brandy, Sparking Trade Dispute with the EU

China has introduced new taxes on imports of European brandy, a move France views as retaliation for the European Union’s (EU) recent decision to impose heavy tariffs on Chinese-made electric vehicles (EVs). The European Commission criticized China’s move, labeling it an “abuse” of trade defense measures and promising to challenge it at the World Trade Organization (WTO).

China’s Justification: Protecting Domestic Producers

China’s commerce ministry defended the decision, describing it as an “anti-dumping” measure aimed at protecting local brandy producers from what it claims are unfair trade practices. According to the Chinese government, European brandy imports threaten to cause “substantial damage” to domestic producers. Importers will now have to provide “security deposits” for European brandy, impacting major brands such as Hennessy and Remy Martin.

Impact on French Brandy Industry

The tariffs have raised alarms among French brandy producers, with many calling the decision “catastrophic” for the industry. France accounts for 99% of the brandy exported to China, and the French cognac lobby group BNIC expressed grave concern, stating, “The French authorities cannot abandon us and leave us alone to deal with Chinese retaliation.” They urged swift intervention to prevent further economic damage.

The impact was felt immediately in the stock market, where shares in major spirits producers plummeted. LVMH, which owns Hennessy, saw a drop of over 3%, while Remy Cointreau, the producer of Remy Martin, fell more than 8%. Analysts estimate that the tariffs could lead to a 20% price hike for consumers, potentially reducing brandy sales by around 20%.

European Commission’s Response

The European Commission condemned the Chinese move and vowed to take action through the WTO. The commission argued that the Chinese duties were unjustified and represented retaliatory behavior for the EU’s recent tariffs on Chinese EVs. French Trade Minister Sophie Primas echoed these sentiments, calling the brandy tax “unacceptable” and contradictory to international trade rules.

Broader Implications: More EU Products Targeted

Beyond brandy, China is reportedly considering imposing new tariffs on other EU imports, including cars, pork, and dairy products. This escalation follows the EU’s approval of tariffs on Chinese-made electric vehicles, which China claims violates global trade agreements. The friction is already affecting European industries; shares in German car manufacturers like Volkswagen, Porsche, Mercedes-Benz, and BMW also dropped amid fears of potential retaliatory tariffs on vehicles.