China takes measures against imports of cognac from the EU, response to EV tariffs

This article was last updated on October 8, 2024

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China takes measures against imports of cognac from the EU, response to EV tariffs

China will take temporary measures against the “dumping” of cognac and similar drinks from the EU on the Chinese market. This is stated in a statement from the Chinese Ministry of Commerce. It is the next step in the escalating trade dispute between China and the EU and comes days after tariffs were announced on Chinese electric cars.

From Friday, Chinese importers of cognac will have to pay a kind of deposit to Chinese customs when importing the drink from the EU. The country is also considering imposing duties on pork.

The Chinese launched an investigation into the import of cognac in January. They did this after the EU had launched an investigation into Chinese subsidies for electric vehicles a few months earlier.

China said two months ago that it would not take any measures against the import of the drink, but said it did have evidence that cognac is being sold at an artificially low price.

Armagnac, grappa and cognac

Cognac and similar spirits are a distillate of wine. They are often named after the region where they originated, such as cognac and armagnac. An Italian variant is grappa.

After the EU member states voted on imposing import duties on Chinese electric cars, French cognac makers already said they feel like victims in the trade dispute. “Our request to postpone the vote and negotiate a solution has been ignored. The French authorities have failed us,” the drinks manufacturers responded.

Difference per brand

Chinese import tariffs differ per brand, just like the import tariffs that the EU introduced for various car brands. For example, 39 percent of the import value must be paid in import tariffs for Hennessy cognac and 38.1 percent for Remy Martin. The rates vary between 34.8 and 39 percent.

Beijing’s announcement led to a reaction on the stock market this morning. The owner of Hennessy cognac, the French LVHM, saw the value of its shares fall by 4.3 percent. The share of Martell, owner of Pernod Ricard, fell by 2.7 percent and that of Rémy Cointreau by almost 4.8 percent.

Shares of other luxury goods, such as Gucci, Hermès, Cartier and Prada, also fell. Investors are concerned that the deteriorating relations between Brussels and Beijing will also affect other sectors.