In a swift escalation of trade tensions, China announced on Tuesday that it would impose temporary penalties on European brandy imports, marking a sharp response to the European Union’s recent decision to impose anti-subsidy tariffs on Chinese electric cars. The Chinese Ministry of Commerce declared that European brandy importers would be required to post deposits of up to 39 percent of the wholesale value of shipments to China, with the possibility of these deposits being converted into permanent tariffs.
China’s move comes after the European Union, led by France, voted last Friday to proceed with tariffs on Chinese electric vehicles, citing concerns over unfair subsidies. In retaliation, China is accusing European brandy producers of dumping their products at low prices in the Chinese market, a claim European officials have dismissed. The tariffs could deliver a heavy blow to European spirits makers, including industry giant LVMH, whose stocks dropped nearly 4 percent following the announcement.
The European Commission quickly responded, stating it would challenge China’s actions at the World Trade Organization (WTO), which prohibits such retaliatory measures without authorization. The Commission emphasized its commitment to defending European producers and warned that China’s move could violate WTO rules. Spirits Europe, a trade association, echoed these concerns, describing the tariffs as a significant financial burden and calling for diplomatic negotiations between Brussels and Beijing.
China has hinted at expanding the scope of its retaliatory tariffs, potentially targeting other European exports, including pork, dairy products, and gasoline-powered cars. Such a move could hit major exporters like Spain, the Netherlands, and Germany, with the latter having opposed the EU’s electric vehicle tariffs last week. Germany’s reluctance stems from fears that trade tensions with China could harm its vital automobile industry, which relies on both exports and imports from China.
France, the leading advocate for the EU’s electric vehicle tariffs, is particularly affected by China’s decision, as most of the brandy imports penalized by Beijing originate from French producers. The timing of China’s announcement—right after a national holiday—demonstrates how quickly the situation is evolving, with the tariff percentages on brandy closely mirroring the EU’s own planned tariffs on Chinese cars.
This escalation is the latest in a year of rising tensions between Europe and China, aggravated by Europe’s objections to China’s support for Russia during the Ukraine conflict and the growing trade imbalance. While some European nations, like Hungary and Germany, have cautioned against protective tariffs, warning of potential retaliation, the broader EU bloc has pressed forward with its measures, signaling a firm stance against China’s trade practices.
Amidst the growing conflict, some analysts predict that China may avoid a full-blown trade war with Europe, given its current economic struggles and concerns over U.S. trade restrictions. Instead, China appears to be taking targeted actions, such as the brandy tariffs, while continuing discussions with European officials to address ongoing concerns over China’s electric vehicle subsidies.
Meanwhile, China is also engaging in trade disputes on other fronts, including with Turkey, which recently imposed a 40 percent tariff on Chinese electric cars. China has requested a review of this move by the WTO, although Turkey has indicated it may exempt companies that establish production facilities within its borders—a route that Chinese automakers are already exploring.
The outcome of this escalating trade dispute could have significant implications for global trade dynamics, particularly as tensions continue to rise between China and its trading partners in Europe and beyond.