Pursuant to Articles 28 and 29 of the Anti-Dumping Regulations, the Investigating Authority has decided to implement provisional anti-dumping measures in the form of a deposit. Starting from October 11, 2024, importers of the investigated products must provide a deposit to the Customs of the People’s Republic of China based on the deposit rates specified for each company in this announcement.

Scope of Investigation: Imported spirits originating from the European Union, obtained by distilling grape wine and packaged in containers holding less than 200 liters.

Product Name: Spirits obtained by distilling grape wine in containers holding less than 200 liters (commonly referred to as “Brandy”).

English Name: Spirits obtained by distilling grape wine in containers holding less than 200 liters (usually called Brandy).

Product Description: Distilled spirits made from raw materials such as grapes, grape juice, grape pomace, or wine.

Usage: Primarily consumed as an alcoholic beverage.

Tariff Classification: Listed under code 22082000 in the Customs Import and Export Tariff of the People’s Republic of China. Distilled spirits made from grape wine and packaged in containers holding 200 liters or more are excluded from the scope of this investigation.

The specific deposit rates applicable to each company are listed in the annex to this announcement.

From October 11, 2024, importers of relevant brandy originating from the EU must provide the required deposit to the Customs of the People’s Republic of China. The deposit will be calculated based on the dutiable value determined by Customs, using the following formula:

Although the measures are provisional, they are expected to deliver a significant impact on prominent brandy brands like Rémy Martin and Hennessy. Rémy Martin, owned by Rémy Cointreau, and Hennessy, owned by Louis Vuitton Moët Hennessy (LVMH), are already feeling the repercussions. On October 8 morning, shares of Rémy Cointreau plunged 8.11%, while LVMH shares fell by 4.07%.

China’s Ministry of Commerce stated that preliminary investigations revealed the domestic brandy industry faces a “threat of substantial damage,” directly linked to the dumping practices.

The new measures will require Chinese importers of EU brandy to provide security deposits, potentially reaching up to 39% of the import value. Currently, the deposit rate for Rémy Martin stands at 38.1%, while Hennessy faces the maximum rate of 39%.

France is poised to bear the brunt of this decision, as China sourced as much as 99% of its brandy imports from France in 2023. Alongside brandy, China also imports significant volumes of other French products, such as cosmetics and aircraft.

Meanwhile, China’s top imports from Italy are pharmaceutical products, with copper being the primary import from Spain. From Germany, China primarily imports saloon cars, while semiconductor manufacturing parts are the leading import from the Netherlands.

Formalizing Import Tariffs on Chinese Electric Vehicles Following EU Findings

On October 4, 2023, the European Union initiated an anti-dumping inquiry into electric vehicles (EVs) manufactured in China. The investigation aimed to assess whether these vehicles were benefitting from state subsidies that distorted market competition and posed a threat to the EU’s automotive industry.

The European Commission’s findings revealed that the Chinese EV supply chain had received extensive state support, leading to significant market advantages. As a corrective measure, provisional countervailing duties were imposed in July 2023 in the form of security deposits. However, the Commission has since decided that these securities will not be retroactively converted into tariffs. Instead, definitive anti-subsidy duties will apply from October 30, 2023, for a period of five years.

Despite being relatively new to the European market, Chinese EV brands are rapidly gaining traction. In 2024, while Chinese brands accounted for just over 1% of all new car registrations in the EU, their share of battery electric vehicles (BEVs) exceeded 8%. This figure reflects a significant increase over the past five years. Although the EU’s share of the global BEV market dropped to 13% during the first three quarters of 2024 (from 14% in 2023), the transition to electric mobility is expected to accelerate sharply between 2025 and 2035. This growth is likely to bring affordable Chinese EVs further into the spotlight.

The definitive duties imposed on Chinese EVs vary based on the level of cooperation by manufacturers during the investigation and the degree of subsidies they received. Specific rates include: BYD: 17%,Geely (including Polestar and Volvo): 18.8%, SAIC (including MG): 35.3%.

Manufacturers outside the sampled group will face a general duty of 20.7%, while those who did not cooperate face the maximum rate of 35.3%. Notably, Tesla, which requested an individual assessment, was assigned a significantly lower rate of 7.8%. These duties, when combined with the existing 10% standard tariff on vehicles imported into the EU, could raise total import duties to as much as 47.6%. The Commission asserts that these tariffs are intended to create equitable conditions for EU and Chinese manufacturers.

The tariffs do not exclusively target Chinese brands. Western automakers like BMW, Renault, and Dacia, which produce EVs in China for export to Europe, are also subject to a 20.7% duty. A substantial portion of imported vehicles, including models such as Tesla’s Model 3 and Volvo’s EX30, are built in China, comprising approximately 60% of EV imports to the EU. The EU views these companies as traders rather than producers in these cases, further emphasizing the dual objectives of fostering fair competition and protecting domestic industries.

Although the tariffs impose additional costs, they are unlikely to halt the advance of Chinese EV brands in Europe. Chinese automakers, including BYD, are preparing to establish local manufacturing facilities, with BYD already planning production sites in Turkey and Hungary. Additionally, the tariffs could incentivize the export of plug-in hybrid vehicles, which are currently exempt from these duties.

Western brands, such as Volvo, are also adjusting their strategies. For instance, Volvo plans to expand production of its EX30 model at its Ghent, Belgium, plant, driven by both rising demand and the increased cost of importing EVs from China.

Despite ongoing negotiations, the EU and China have failed to avert the imposition of definitive tariffs. China has expressed concerns that the investigation may be politically motivated rather than driven by economic necessity. Several EU member states, including Germany, Slovakia, and Hungary, opposed the tariffs, yet the measure was passed by a qualified majority.

China is expected to respond with retaliatory tariffs, potentially targeting key EU exports such as French brandy, Spanish pork, and German vehicles. However, both sides are motivated to avoid a full-scale trade conflict due to their mutual dependence. China remains the EU’s largest source of imports, while the EU is a critical export market for Chinese goods, particularly in the automotive and technology sectors.

The EU’s decision aligns with a broader global trend toward increased trade protectionism. As of the end of 2023, the EU had 182 trade defense measures in place, including 156 anti-dumping and 25 anti-subsidy measures. China remains a primary target of these actions, with measures extending beyond traditional subsidies to address cross-border financial support.

While the tariffs aim to safeguard the EU’s automotive industry, they also highlight the complexity and potential unintended consequences of such measures. Both the EU and China are expected to carefully navigate their trade relationship to prevent further escalation, balancing protectionist policies with the economic realities of global interdependence.

Rising EU-China Trade Tensions

China’s decision to impose anti-dumping measures on European brandy imports comes in response to the EU’s tariffs on Chinese electric vehicles as discussed above. This has further exacerbated tensions between the two sides, despite ongoing efforts from both Brussels and Beijing to find a common ground.

Reacting to China’s measures, EU Commission spokesman for Trade & Agriculture, Olof Gill, stated on X (formerly Twitter):

 “The @EU_Commission will challenge at @wto the announced imposition of provisional antidumping measures by China on imports of brandy from the EU. We believe that these measures are unfounded, and we are determined to defend EU industry against abuse of trade defence instruments.”

Russ Mould, investment director at AJ Bell, commented:

“China continues to engage in tit-for-tat trade disputes, centering on accusations of unfair competition and protectionism. The anti-dumping measures targeting EU brandy have sent shockwaves through major drinks companies, including Rémy Cointreau, Pernod Ricard, and Diageo.

This move marks another flashpoint in the growing trade friction between China and Western economies. It could lead to higher prices for consumers and potentially reduce sales of EU-origin brandy, as buyers may shift toward cheaper alternatives.”

Brussels immediately hit back against the measures, announcing it would bring a case against the tariffs at the World Trade Organization. “We believe that these measures are unfounded, and we are determined to defend EU industry against the abuse of trade defence instruments,” said the European Commission.

Beijing has strongly criticized the EU’s tariffs on electric vehicles (EVs), labeling them as protectionist and a misuse of international trade rules, while also arguing that such measures undermine global efforts to combat climate change.

“We made appropriate and proportionate decisions, and I don’t see any justification for retaliation,” said Paolo Gentiloni, the EU Economy Commissioner.

Although both Beijing and Brussels have indicated that discussions over EV tariffs will continue—despite resistance from some EU member states, including Germany and Hungary—senior diplomats told the Financial Times that other EU countries are preparing for potential Chinese countermeasures targeting their key exports. France, which supported the EV investigation and voted in favor of the tariffs, was a significant driver behind the move.

On October 8, China’s commerce minister announced that the country is considering measures against heavy-engine internal combustion vehicles, a move that could heavily impact German car manufacturers. Beijing has also launched anti-dumping investigations into European dairy and pork imports and filed a complaint with the World Trade Organization (WTO) over the EV tariffs.

Florent Morillon, president of the cognac producers’ association BNIC, remarked that China’s swift decision to target brandy imports, following the EU’s formalization of surcharges on Chinese EVs, “clearly signals a hardening of [China’s] stance.”

Frustration among industry leaders has grown, with complaints being raised in Paris and Brussels. Some believe that the EU, under von der Leyen’s leadership, misjudged its approach by trying to appear firm on China.

“China responds better to negotiated agreements rather than unilateral announcements. Actions like these provoke stronger reactions. They want to be rulemakers, not rule takers,” one industry source said.

However, EU officials downplayed the escalation, suggesting that China’s response has been measured. They expressed confidence that Beijing does not want to ignite a full-scale trade war, which would harm its own exporters and lead to job losses. “Even with these tariffs, Chinese EVs will still find a market in Europe,” said one EU official. “This isn’t like the U.S., which has effectively shut its doors to Chinese imports.”

Opportunities and Challenges of Retaliatory Tariffs

Retaliatory tariffs are trade barriers imposed by a country in response to similar trade measures enacted by another country. These tariffs are typically introduced as a reaction to what is perceived as unfair trade practices, such as dumping, subsidies, or other discriminatory trade policies, or as a direct response to tariffs imposed by another country. Isn’t China’s provisional anti-dumping measures on EU-imported brandy also a form of retaliatory tariff against the EU’s higher tariffs on Chinese electric vehicles?

Soybeans: China imposed tariffs on U.S. soybeans, causing a sharp decline in U.S. exports. The trade destruction effect was significant, with a loss of approximately USD 7.1 billion in soybean exports .

Pork Products: U.S. pork exports faced retaliatory tariffs, resulting in a loss of USD 0.8 billion. This was only partially compensated by increased exports to non-retaliatory markets .

Coarse Grains: Retaliatory tariffs on coarse grains caused a loss of USD 0.6 billion in U.S. exports .

Enormous Cooperation Potential and Underlying Concerns in EU-China Economic Relations

The cooperation potential between China and the EU is vast, yet recent years have seen rising risks of economic and trade friction, creating significant uncertainties. Recognizing this, prominent voices within the EU have consistently warned against protectionist tendencies.

On September 9, a report titled The future of European competitiveness garnered significant attention across Europe. Commissioned by EU President Ursula von der Leyen and led by former European Central Bank President and Italian Prime Minister Mario Draghi, this nearly 400-page report highlighted Europe’s persistent concerns over slowing economic growth since the 21st century. Despite numerous strategies to boost growth rates, the downward trend remains unchanged.

Draghi identified several factors contributing to the EU’s declining productivity, with the most critical being Europe’s lag in digital innovation compared to China and the United States. The report emphasized that in areas such as new technologies and clean energy, Europe remains at a disadvantage. To keep pace with China and the U.S., Draghi argued that the EU must adopt more coordinated industrial policies, expedite decision-making, and significantly increase investment.

The report underscored the importance of EU-China economic relations, recommending that the EU adopt more pragmatic and flexible policies to avoid falling into the trap of protectionism. It highlighted that in emerging sectors such as clean energy, Chinese products offer the best cost-performance ratio and can aid the EU in achieving its climate goals. In industries where EU manufacturers already lag significantly, the report suggested that the EU should invest more in technological upgrades while allowing foreign products to remain available in the European market.

“We are not like the United States; we cannot build a wall of protectionism,” Draghi remarked on September 30 at a forum hosted by the Bruegel Institute in Belgium. He reiterated that the EU, as one of the world’s most open economies, must maintain this openness. Draghi called for pragmatic trade measures aligned with the broader objective of enhancing EU productivity. Unless driven by overwhelming geopolitical needs, defensive measures should not be systematically adopted. He cited solar panels imported from China as an example, warning that imposing tariffs would only burden EU consumers without offering domestic manufacturers a competitive chance.

Within the EU, opposition to anti-subsidy tariffs on Chinese electric vehicles (EVs) has been mounting. Nonetheless, the EU persists with protectionist actions, which are likely to disrupt not only Chinese companies but also global and European manufacturers producing EVs in China. Rather than bolstering the resilience of Europe’s automotive industry, such measures risk discouraging Chinese investment in the EU.

In recent years, the EU has classified China as a “partner, competitor, and systemic rival.” This so-called “triple positioning” has constrained the EU’s strategic flexibility and left Europe increasingly awkward on the global stage. Some European scholars argue that excessive dependence on the U.S., lack of autonomy in international affairs, and neglect of other global powers’ influence have harmed Europe’s international standing rather than bringing tangible benefits.

Both China and the EU are among the world’s most significant economies, with economic and trade relations serving as the cornerstone of their cooperation. However, since von der Leyen took office, the U.S. has continuously influenced the EU’s foreign policy through pro-American factions within the bloc, forcing alignment with Washington. Although the EU recognizes that enhancing cooperation with China is the most effective and straightforward way to achieve its competitiveness goals, it often prioritizes political correctness over market realities. In response to unsubstantiated concerns about a “systemic threat” from China, the EU has frequently intervened in trade relations, launching anti-subsidy and anti-dumping investigations against Chinese companies and products. Such actions disrupt bilateral relations, hinder Europe’s economic recovery, and exacerbate global economic instability.

By leveraging the Ukraine crisis, the U.S. has effectively severed Russo-European relations. Against the backdrop of “de-risking” with China, the stabilizing effect of EU-China economic cooperation is diminishing. The EU’s approach to China has become increasingly uncertain. From a strategic perspective, particularly within the U.S.-China-Russia triangular relationship, Europe appears to be the greatest loser in this geopolitical contest.

As Josep Borrell, the EU’s High Representative for Foreign Affairs and Security Policy, recently emphasized, the West must acknowledge the success of China’s governance system. While differences in systems and perspectives exist, the EU cannot afford to engage in systemic confrontation with China. China’s rise is an objective reality that the West cannot impede. Under the ongoing U.S.-China rivalry, the EU must act in its own interests and forge its own path forward.

The escalating trade tensions between China and the European Union (EU) have reached a critical point, as China’s Ministry of Commerce announced the implementation of provisional anti-dumping measures targeting imported brandy from the EU. These measures, perceived as a retaliatory response to the EU’s recent tariffs on Chinese electric vehicles (EVs), highlight the growing complexities in global trade relations. While the stated rationale for these measures lies in protecting China’s domestic brandy industry from alleged dumping practices, the broader implications underscore a significant strain in EU-China economic relations, reflecting a blend of political motivations and economic competition.

By Yuxing Tao