Beijing Eases Tensions by Holding off Tariffs on EU Brandy

China announced it will not impose provisional tariffs on brandy from the European Union, despite finding it sold below market prices, allowing room for smoother trade talks. The decision comes amidst ongoing trade disputes, including tariffs on Chinese EVs. French cognac producers remain concerned about future tariffs.

Beijing announced on Thursday it will refrain from imposing provisional tariffs on brandy imported from the European Union, despite evidence it was sold in China below market prices. This decision provides respite amid tense trade negotiations between China and the EU involving multiple sectors.

China's commerce ministry stated that European distillers were selling brandy in the Chinese market at a margin between 30.6% and 39.0%, damaging the domestic industry. However, provisional anti-dumping measures will not be applied for now, although the possibility remains for future action. The probe is set to conclude by January 5, 2025, but this could be extended under special circumstances.

China is also lobbying the EU's 27 member states to reject a proposal to levy up to 36.3% duties on Chinese electric vehicles in an upcoming vote. The brandy tariff decision could be seen as an attempt to gain favor in these broader trade negotiations. France, which accounted for 99% of China's brandy imports last year, is a key player in this issue.

The French cognac association, Bureau National Interprofessionnel du Cognac, acknowledged China's provisional decision but expressed continued concern. They warned that potential tariffs averaging 34.8% would significantly impact Cognac exports to China, which constitutes a significant market.

Following the announcement, shares in French spirit makers initially surged by about 8%, before stabilizing. Pernod Ricard, Remy Cointreau, and Italy's Campari all experienced temporary increases.

Pernod Ricard's CEO Alexandre Ricard noted the company's caution regarding China, acknowledging the temporary reprieve. The anti-dumping probe on EU brandy, announced in January, is believed to be part of a broader trade dispute. China has also recently opened probes into European dairy and pork products.

The dairy investigation started shortly after Brussels announced its revised tariff plan for Chinese-made electric vehicles. Dairy exports from France to China were valued at $211 million last year, primarily in milk and cream.

(With inputs from agencies.)