China announced on Thursday that it will not impose tariffs on EU brandy imports, despite confirming that European distillers had been selling at reduced prices in China.
The decision not to impose tariffs on brandy is seen as a strategic move by China, offering a much-needed respite amid tense trade negotiations between China and the EU.
The EU is currently considering imposing duties of up to 36.3% on Chinese-made electric vehicles (EVs), with a vote scheduled for October.
By refraining from penalising European brandy imports, China may be positioning itself to gain favour in these broader trade discussions.
China’s brandy tariff move is strategic
China’s commerce ministry revealed that European brandy producers had been selling their products at a dumping margin ranging from 30.6% to 39.0%.
Despite this, the ministry chose not to impose provisional tariffs, even though it acknowledged the negative impact on the domestic Chinese industry.
This decision comes at a crucial time as China seeks to influence the EU against imposing additional tariffs on Chinese EVs.
The EU is currently considering imposing duties of up to 36.3% on Chinese-made EVs, with a vote scheduled for October.
The Chinese government announced the anti-dumping probe against European brandy in January, seen as retaliation against the EU’s decision to investigate whether Chinese EV manufacturers receive unfair state subsidies.
French cognac producers were expected to be hit hard if China imposed any tariffs following the probe.
Last year, 99% of China’s imported brandy came from France, reaching $1.74 billion in value, according to Chinese customs data.
European brandy stocks surge
Shares of major European spirit producers, including France’s Rémy Cointreau and Pernod Ricard, surged by around 8% following the announcement.
Rémy Cointreau derives about 70% of its sales from cognac, with China being one of its largest and most profitable markets.
Italy’s Campari also saw a rise of 4.5%, triggering an automatic halt in Milan’s trading.
Despite the temporary reprieve on brandy tariffs, Pernod Ricard’s CEO, Alexandre Ricard, maintains a cautious outlook on China, reflecting ongoing uncertainty in the trade relationship between the two powers, according to Reuters.
Ricard declined to comment in detail on the decision, focusing instead on the company’s broader business strategy during the annual results presentation.
China launches new EU product probes
While the brandy tariff decision offers some relief, tensions remain.
Beijing has recently launched investigations into European dairy and pork products, raising concerns about potential further trade barriers.
The dairy probe, initiated shortly after the EU published its revised tariff plan for Chinese EVs, represents the latest development in the escalating trade discussions.
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