China goes for the slow burn with anti-dumping brandy levy for Europe

The EU-China tariff war has reached another level, with China announcing it is to bring in anti-dumping measures on imported brandy from the European Union (EU). The move is seen as a tit-for-tat measure against the EU, after the bloc recently decided to increase tariffs on imported Chinese electric vehicles (EVs). 

Although the measures are temporary, they are still expected to be a significant blow for brandy brands such as Rémy Martin and Hennessy. Rémy Martin is owned by Rémy Cointreau; Hennessy is owned by Louis Vuitton Moët Hennessy (LVMH). 

Rémy Cointreau shares plunged 8.11% on Tuesday morning, while LVMH shares dropped 4.07%. 

China’s Ministry of Commerce has said that, following preliminary probes, the government has determined that the country’s domestic brandy sector is being “threatened with substantial damage, and that there is a causal relationship between the dumping and the threat of substantial damage”.

The new levy will mean that Chinese businesses importing EU brandy will now have to provide security deposits, which can go up to 39% of the total import value. This requirement is expected to come into action from 11 October onwards. 

At present, the security deposit rate for Rémy Martin is 38.1%, while Hennessy will have to pay the higher rate of 39%. 

France is expected to be most affected by this decision, with China importing as much as 99% of its brandy from France in 2023. Other French products being imported by China include cosmetics and aircraft. 

On the other hand, the top Chinese imports from Italy are pharmaceutical products, with copper being the top import from Spain. The top German import to China is saloon cars, with semiconductor manufacturing parts being the product most imported from the Netherlands. 

China hits back at EU following increased tariffs on EVs

China’s latest move against European brandy imports follows the EU recently revealed that its planned tariffs on Chinese electric vehicles being imported into the bloc could go as high as 45%. 

This has increased EU-China tensions, which have been on the rise despite numerous attempts by both Brussels and Beijing to reach a mutually acceptable solution. 

China has now also hinted that it may not stop only at brandy, but also look to impose tariffs on other goods such as imports of pork, dairy and vehicles from the EU. If so, this could mean bad news for German car makers such as Mercedes-Benz, Audi and BMW especially, as they have various production facilities in China, which is also one of their key markets. 

Russ Mould, investment director at AJ Bell, said: “China continues to have tit-for-tat trade disputes centred upon accusations of unfair competition and protectionism.

“It has imposed anti-dumping measures on brandy imported from the EU, knocking shares in big drinks companies for six. Rémy Cointreau, Pernod Ricard and Diageo were all hit by the news, representing another point of tension between the Asian country and the West.

“That could push up the price of such products for drinkers, and potentially lead to reduced sales of EU-originated brandy if the consumer seeks cheaper alternatives.”