China Prepares to Levy Tariffs Against French Cognac in Escalating Trade Dispute With the EU

China is reportedly preparing to levy tariffs on European brandy, a move that could deal a crippling blow to cognac makers in an escalating trade dispute between EU officials and Chinese authorities. On Friday, an article posted to CCTV — a media platform with ties to the Chinese Communist Party — reported that import tariffs on European brandy are expected to be implemented before the end of August. The article came days after the European Commission announced duty taxes of up to 38.1% on Chinese electric cars. Referencing the electric car duties, Yuyuan Tantian of the CCTV wrote:

"It is a naked act of protectionism, creating and escalating trade frictions, and destroying fair competition in the name of 'maintaining fair competition.' It is the greatest 'unfairness.' Faced with such actions, China must of course take countermeasures. [...] The EU still has time to think about whether to choose a win-win situation or to harm others and not benefit itself."

The retaliatory conflict has been nearly a year in the making. The EU first announced an investigation into Chinese car subsidies in September, followed quickly by a Chinese anti-dumping investigation into European brandy. In practice, the move took a particular toll on French cognac, which makes up 99.28% of all EU brandy imports to China.

Unless the tariffs are called off, famed cognac producers like Hennessy, Courvoisier and Remy Martin will be forced to adjust their strategies. France reportedly shipped over 35 million bottles of cognac to China in 2023, making it the second-largest international market for the spirit behind the U.S.

[caption id="attachment_66462" align="aligncenter" width="600"] French President Emmanuel Macron welcomes Chinese President Xi Jinping, center,Tuesday, May 7, 2024 at the Tarbes airport, southwestern France. (Photo: Aurelien Morissard/AP Images)[/caption]

Up until recently, it appeared that the dispute might be avoided entirely. In May, Chinese President Xi Jinping visited Emmanual Macron in France for a two-day diplomatic visit during which the tariff scuff was reportedly discussed behind closed doors. In an on-the-nose nod to the circumstances, the French President even gifted Jinping a bottle of Hennessy X.O. Cognac alongside a Louis XIII by Remy Martin.

Macron remarked during a press conference:

“I thank the president for his open attitude regarding provisional measures on Cognac and for his wish not to implement them."

The tune has now changed. In a related move, China announced on Monday that it will open an anti-dumping investigation into European pork, spelling out a similar trajectory for what happened to cognac a few months earlier.

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