China Imposes New Taxes on European Brandy Imports in Retaliation

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China Imposes New Taxes on European Brandy Imports in Retaliation

China has retaliated against the European Union by introducing new taxes on European brandy imports, a move that is being framed as an "anti-dumping" measure by the Chinese commerce ministry to safeguard domestic producers from the adverse effects of European imports. The European Commission has expressed strong opposition to the new tariffs, vowing to contest them at the World Trade Organization. French Trade Minister Sophie Primas has criticized the brandy tax as retaliatory and a violation of international trade regulations.

This latest development is expected to have a severe impact on France, which supplies 99% of brandy exported to China. Well-known French brands like Hennessy and Remy Martin are anticipated to bear the brunt of the measure, with experts warning of potential catastrophic consequences for the industry. The French cognac lobby group BNIC has called for intervention from French authorities and the EU, emphasizing that brandy producers are being caught in the crossfire of a dispute that is unrelated to their sector.

Following the announcement of the new tariffs, shares of luxury brands involved in brandy production experienced a downturn. LVMH, the producer of Hennessy, saw a decline of more than 3%, while Remy Cointreau, the company behind Remy Martin, witnessed a drop of over 8%. Analysts have cautioned that the taxes could lead to a 20% price hike for Chinese consumers, potentially resulting in a 20% decrease in sales volumes and revenue for suppliers. This escalation in the trade dispute exacerbates tensions between the EU and China, which intensified after the EU's decision to impose tariffs of up to 35% on Chinese electric vehicles, prompting China to signal potential further tariffs on European products such as cars, pork, and dairy. Concerns have emerged in Germany, with shares of car manufacturers like Volkswagen, Porsche, Mercedes-Benz, and BMW declining amid worries that they could be the next targets of Chinese tariffs.