China will impose import duties on brandy from Europe starting Saturday, mainly targeting French cognac. The taxes could amount to almost 35 percent, although major producers such as Rémy Martin and Hennessy will be exempted if they adhere to minimum prices.
According to the Chinese, research shows that European companies are dumping their cognac on the Chinese market at low prices. Therefore, tariffs of up to 34.9 percent are necessary, according to the authorities in Beijing.
The measure appears to be a reaction to the European Union’s decision to impose duties on Chinese electric cars. Brussels decided to do so last year to protect its own auto industry.
Chinese electric cars have quickly become popular in Europe, partly due to their relatively low price, which has significantly impacted European car manufacturers. According to the European Commission, Chinese cars constitute unfair competition because they receive substantial state support.
China was unhappy with the tariffs on its cars and wanted to take countermeasures. It has targeted cognac, on which it temporarily increased tariffs in October.
This hits French cognac producers hard. According to a previous estimate, they have lost tens of millions of euros per month due to a sharp drop in sales in China. After the United States, the country is the largest sales market for French cognac.
Producers such as LVMH and Rémy Cointreau have made special price agreements with China. Their exports to China will not be affected by the tariffs, provided they do not fall below an agreed floor price. The level of this price is unclear.
Tensions between US and China are rising
The EU and China are trying to resolve the trade dispute, but tensions are far from eased. According to news agency Bloomberg, China is even considering canceling part of a two-day summit with leaders of the European Union, planned for later this month.
The tariffs on cognac come at a time when both power blocs are also embroiled in a battle with the US. For example, the EU wants to conclude a trade agreement with the US in the coming days, in order to prevent US President Donald Trump from imposing high import duties on European goods.
If the EU and the US do not reach an agreement before Wednesday, July 9, Trump threatens with high tariffs. This could hurt European companies that sell many goods to the US, as their sales volumes may fall. It can also be annoying for Americans themselves, because they spend more if they still buy European products.