Brandy tax

China Strikes Back at EU with Brandy Tax

China has imposed new tariffs on European brandy imports, in what France claims is retaliation for the European Union’s recent decision to levy heavy duties on Chinese-made electric vehicles. The European Commission has vowed to challenge the tariffs at the World Trade Organization (WTO), calling China’s action an “abuse” of trade defence measures.

China, however, insists that the tax is a legitimate “anti-dumping” measure aimed at protecting its domestic producers. The tariffs will affect major French brands, including Hennessy and Remy Martin, sparking concerns in France’s brandy industry.

French brandy producers warned that the new duties could be “catastrophic,” with significant impacts on the sector. Shares in luxury spirits companies, such as LVMH (Hennessy’s parent company) and Remy Cointreau, dropped sharply following the announcement, with LVMH falling more than 3% and Remy Cointreau declining by over 8%.

The move comes just days after the EU imposed steep tariffs on Chinese electric vehicles, citing unfair subsidies. In response, China’s commerce ministry claimed that European brandy imports threaten “substantial damage” to its local producers and announced that importers would need to pay security deposits on European spirits. China is also considering tariffs on other EU imports, including cars, pork, and dairy products.

France’s Trade Minister, Sophie Primas, condemned the brandy tax, calling it a retaliatory measure in response to the EU’s electric vehicle tariffs. Primas stated that such retaliation is “unacceptable” and goes against international trade rules. France, she added, would work with the EU to seek action at the WTO.

France accounts for 99% of the brandy exported to China, and the French cognac lobby group BNIC has urged the government to take immediate action. The group described the situation as an unfair retaliation that could severely damage the industry if the taxes are not suspended.

The tariffs are expected to result in a 20% price increase for consumers, which could lead to a significant decline in sales volumes. The announcement also triggered a sell-off in shares of German carmakers, including Volkswagen, Porsche, Mercedes-Benz, and BMW, as the market anticipates possible further tariffs on EU exports.

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