China Slaps Provisional Tariffs On EU Brandy Imports

China said Tuesday it would impose provisional tariffs on brandy imported from the European Union, marking the latest salvo in an escalating trade row between Beijing and Brussels.

The two are major economic partners but have butted heads in recent months over Beijing's generous subsidies for its domestic industries.

Brussels argues that the support undermines the principle of free competition and helped drive down the prices of Chinese exports, undercutting European competitors.

Beijing has denied the claims and accuses Brussels of protectionism.

China launched an investigation this year into EU brandy, months after the bloc undertook a probe into Chinese electric vehicle subsidies.

Beijing said in August it would not impose provisional tariffs on brandy makers, even though it had found evidence of dumping, but did not rule out subsequent measures.

From Friday, operators will have to pay a "corresponding guarantee" to Chinese customs when importing EU brandy into the country, the commerce ministry in Beijing said.

It said the amount would be based on calculations involving prices approved by customs, as well as import taxes.

The investigation had "preliminarily determined that imports of certain brandy originating from the European Union were being dumped, threatening substantial damage to the domestic brandy industry", the ministry said.

It said the probe also established "a causal relationship between the dumping and the threat of substantial damage".

The ministry released a list detailing the rates each company would expect to pay, ranging from 30.6 percent for cognac house Martell to 39 percent for Jas Hennessy and 38.1 percent for Remy Martin.

Shares in French spirits giants Remy Cointreau and Pernod Ricard fell sharply in Paris on Tuesday following the news.

The European Union said Tuesday it would seek to challenge the new measures announced by Beijing.

"The European Commission will challenge, at the (World Trade Organization), the announced imposition of provisional antidumping measures by China on imports of brandy from the EU," the commission's trade spokesperson Olof Gill said.

"We believe that these measures are unfounded, and we are determined to defend EU industry against the abuse of trade defence instruments," Gill added in a statement.

France's cognac makers pleaded Tuesday for an end to an escalating EU-China trade spat, warning that the latest measures threaten the sector.

"We appeal to our government to finally initiate the necessary steps to put an end to this escalation, of which we are the hostages," the National Interprofessional Bureau of Cognac (BNIC) said in a statement co-signed by other spirits makers and exporters.

The BNIC said it had not yet received details of the new rules but the announcement sent an "additional signal" that China intended to implement further taxes.

"We will already have to pay money" for the guarantee given that the biggest cognac exporters already have their own import subsidiaries in China, said Raphael Delpech, director general of the BNIC.

Later Tuesday, the commission said it would explore "all possibilities to offer appropriate support to EU producers" that face a negative impact.

"We have tools at our disposal to address injurious impacts on EU producers from situations of market disturbance, or threat thereof," it said in a statement.

China imported more brandy than any other spirit in 2022, most of it from France, according to a report by research group Daxue Consulting.

French President Emmanuel Macron thanked his Chinese counterpart Xi Jinping in May for not imposing customs duties on French cognac, presenting him with bottles of the expensive drink.

However, the European Union gave a definitive green light last week to imposing extra tariffs of up to 35.3 percent on EVs imported from China, saying Beijing has unfairly subsidised its domestic industry to the detriment of European automakers.

Brussels is also investigating Chinese subsidies for solar panels and wind turbines.

Beijing has in turn launched a probe into EU subsidies of some dairy and pork products imported into China.

Asked about the brandy measures and those probes Tuesday, Beijing's commerce ministry said the investigations were being conducted in "accordance with the law".

A spokesperson reiterated that Beijing was mulling "measures such as raising tariffs on imported large-displacement fuel vehicles", referring to cars with larger engines that typically produce more emissions.

"China will take all necessary measures to firmly safeguard the legitimate rights and interests of Chinese industries and enterprises," the spokesperson said.