China’s trade tensions with the European Union escalated on Friday as Beijing announced a hearing for its anti-dumping investigation into European brandy imports.
The Ministry of Commerce will hold the hearing on July 18th to examine claims that European producers are selling brandy at unfairly low prices in China, potentially harming domestic liquor businesses. This move coincides with the EU’s implementation of additional tariffs on Chinese electric vehicles (EVs), ranging from 17.4% to 37.6%. The EU justifies these tariffs as a response to what they perceive as unfair government subsidies for Chinese EV manufacturers.
The Chinese auto industry reacted strongly, with the state-backed China Association of Automobile Manufacturers calling the EU’s tariffs “unacceptable.” This development fuels speculation of potential retaliatory measures from Beijing.
Industry experts like Jean-Jacques Guiony, CFO of LVMH (owner of cognac brand Hennessy), believe China’s brandy probe is a direct response to the EU’s EV actions. He expressed concerns about businesses being caught in the crossfire of trade disputes.
French cognac producers stand to suffer the most if China imposes tariffs after the probe. Last year, France supplied 99% of China’s imported brandy, valued at $1.74 billion.
China initiated the brandy investigation in January, seen as retaliation for the EU’s probe into potential subsidies for Chinese EV manufacturers. Talks are ongoing, but without a resolution, the tariffs become permanent in November.
Beijing has threatened “all necessary measures” to protect its interests. This could include targeting EU pork imports, as China already launched a separate anti-dumping investigation against them. Additionally, analysts warn of potential restrictions on European agricultural products, aviation, and large-engine cars.