In a significant development in the dynamics of global trade relations, China has widened its anti-dumping investigation into brandy imports from the European Union (EU). The news comes against the backdrop of growing trade tensions between China and the EU, particularly after the EU slapped tariffs on Chinese electric vehicles.
Background of the Investigation
China's Ministry of Commerce (MOFCOM) initiated the anti-dumping probe on January 5, 2024, at the request of the China Alcoholic Drinks Association, a local brandy industry association. The investigation targets spirits made by distilling grape wine in containers with a capacity of less than 200 liters, which were imported into China from October 1, 2022, to September 30, 2023. The investigation also targets any loss incurred by the Chinese brandy market from January 1, 2019, to September 30, 2023.
In August 2024, the preliminary calculation by MOFCOM found that EU brandy was dumped and sold at dumped prices, seriously endangering China's domestic market for brandy. Temporary anti-dumping measures were therefore imposed since October 11, 2024, requiring importers to deposit against dumping margins ranging from 30.6% to 39%.
Extension of the Investigation Period
On December 25, 2024, MOFCOM made the ruling to continue the period of investigation to April 5, 2025, owing to the complexity of the case. EU exporters had submitted price commitment applications and the domestic brandy industry had applied for legal protection, as told by the ministry. On the European side's request, Chinese officials pledged to suspend the final decision, paving the way for further cooperation by all parties concerned.
French Cognac Producers' Influence
The extension has significant implications for French cognac producers, whose business relies heavily on exports. Prior to the inquiry, Chinese imports of French cognac were being slapped with ad-hoc levies ranging from 30.6% to 39%, beginning October 2024. They have taken a toll on French cognac producers, incurring financial losses worth €50 million ($54 million) every month.
In response to these problems, French Foreign Minister Jean-Noel Barrot said China had agreed to delay the potential permanent imposition of higher customs taxes on French cognacs by three months. Barrot described the delay as "a first step toward resolving this conflict" during his visit to China.
Wider Trade Tensions
The brandy import trade spat is one case in point involving a larger arena of rising Chinese-EU tensions in trade relations. The European Union's choice to impose tariff on Chinese-made electric vehicles because of concerns related to unfair trade competition has put China in its sights for responding measures. It includes possible imposition of tariffs by China on the EU-produced high-displacement motor vehicles and duties on European-brandies.
**Recent Diplomatic Developments
Against the background of these tensions, China and France have resolved to hold three senior-level dialogues this year on strategic, economic, financial, and cultural issues. This was agreed upon during a meeting of Chinese Foreign Minister Wang Yi with his French counterpart Jean-Noel Barrot in Beijing. The two nations are keen to intensify cooperation in fields such as agriculture, nuclear energy, aviation, aerospace, and emerging sectors such as artificial intelligence and the digital economy.
Industry Reactions
The cognac industry has been eager to discover ways of mitigating the impact of the tariffs. Hennessy, a leading French cognac producer, took steps towards beginning to bottle its beverages within China to shun the 30% tariffs imposed by Beijing. The step has led to walkouts by France's half of Hennessy staff, citing concerns of layoffs. The outlook is further threatened by a poor grape harvest and the looming danger of additional U.S. tariffs.
Looking Ahead
With the investigation period now pushed to April 5, 2025, stakeholders on both sides continue to negotiate to resolve the conflict. The outcome of these negotiations will have significant implications for the cognac industry, broader trade relations between China and the EU, and the global spirits market.
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