China’s hit at EU brandy sparks fear of all-out trade war

Beijing will impose provisional measures against imports of European brandy starting this week, the Chinese Commerce Ministry announced Tuesday, upping the ante in a brewing trade war between the European Union and China and triggering a strong response from Paris. 
The announcement comes just days after EU countries voted to slap duties on Chinese electric vehicles for five years. The move mainly targets French luxury Cognac brands, after Paris was viewed as the primary supporter of the European Commission’s investigation into state subsidies on Chinese electric vehicles, and voted in favor of imposing duties on EVs in a vote last Friday.
Paris accused China’s President Xi Jinping of breaking a promise he had made to French President Emmanuel Macron of not imposing temporary duties during a visit to Paris last May. 
“I find these measures incomprehensible. There is no justification for them,” said France’s Junior Trade Minister Sophie Primas. 
“We are very disappointed by this announcement, which goes against the commitment made by President Xi during his visit to France,” she said via written statements to POLITICO. 
“I will soon be attending the G20 Summit in Brasília, where I will be taking the opportunity to hold a dialogue with my Chinese counterpart. I’m ready to go to China to put forward our positions,” she added. 
As of Oct. 11, importers will have to provide a security deposit to Chinese customs when importing brandies originating in the bloc, the Chinese Commerce Ministry said in the statement. The deposits are calculated according to rates ranging from 30.6 to 39 percent on producers such as Remy Martin, Moët Hennessy or Martell. 
The hit at EU brandy marks Beijing’s latest retaliatory strike against the bloc after it launched investigations into European pork and dairy in response to the EV investigation that Commission President Ursula von der Leyen launched a year ago. 
Slapping provisional duties is a U-turn from an earlier declaration in late August when China temporarily decided against it, as Brussels and Beijing negotiated to find a solution to the EV dispute — where the Commission is set to impose tariffs of up to 35.3 percent on Chinese electric vehicles.
China claims the costly beverages are dumped on the Chinese market — sold cheaper than the cost price to undercut local competitors — but lobby group Spirits Europe says it has been transparent with Beijing and its “evidence provided clearly demonstrates the absence of dumping” or even the potential for it. China produces no meaningful similar product to Cognac or Armagnac.
Commenting on the announcement, a spokesperson for the Chinese Commerce Ministry said that more was coming, with Beijing also looking into “raising tariffs” on large-engine cars. 
“The reason why China’s response seems relatively contained is because data shows that even with the new tariffs, Chinese electric vehicles are still going to make a profit in the EU,” said Francesca Ghiretti, a researcher on EU-China relations at Rand Europe.
The brandy sector has repeatedly warned that it shouldn’t become a hostage of geopolitical tensions between Beijing and Brussels.
“We are the first to pay the piper,” said Anthony Brun, president of France’s AOC Cognac producers. “China is trying to demonstrate that it is always giving priority to negotiation.”
China is the second-biggest export market for the French Cognac sector, after the United States, with 61.5 million bottles sold there in 2023, according to figures provided by the BNIC, France’s Cognac governing body. 
Other European agriculture sectors, such as dairy and pork, fear similar measures. Ten EU countries voted in favor of the duties, including the Netherlands, Italy and Poland, and risk being more exposed to China’s retaliation. Germany and Hungary, on the other hand, were among the five countries to vote against the duties.
Spain is particularly vulnerable to the potential duties on pork, and Madrid abstained for that reason last Friday. Speaking to POLITICO on Monday, the country’s Minister for Economy and Trade Carlos Cuerpo said the EU needs to keep negotiating with China “to avoid an escalation of these protectionist measures that, in the end, provide for a lose-lose situation.”
However, analyst Gregor Sebastian at the Rhodium think tank said he considers the Cognac duties too small to change the minds of EU policymakers. “If China would go after larger agricultural exports from the EU or, for instance, luxury goods, cosmetics or cars, it could soon be a different story.” 
The EU will challenge China’s decision at the World Trade Organization, spokesperson Olof Gill said. 
Giovanna Faggionato contributed to this report. 
This story has been updated.