In a strategic move that may influence broader trade negotiations, Beijing announced on Thursday that it would not impose provisional tariffs on European Union (EU) brandy imports, despite findings that the product had been sold in China below market prices. This decision offers a temporary reprieve in what has been an increasingly tense trade relationship between China and the EU, particularly as both sides navigate complex negotiations over various sectors.
China's commerce ministry reported that European distillers had been selling brandy in China's vast consumer market at a margin ranging from 30.6% to 39%, resulting in damage to its domestic industry. However, the ministry chose not to impose immediate anti-dumping measures, signaling that while tariffs remain a possibility, they will not be enforced "for the time being."
The timing of this decision is significant, given the ongoing trade disputes between China and the EU, particularly around the automotive sector. The European Commission is set to vote in October on a proposal to impose additional duties of up to 36.3% on Chinese-made electric vehicles (EVs). China's decision to hold off on brandy tariffs could be interpreted as a strategic maneuver aimed at influencing the EU's stance on these proposed duties.
"This looks like a negotiation tactic from China," said Barclays analyst Laurence Whyatt, who anticipates a connection between the EU’s potential tariffs on Chinese EVs and China’s actions regarding EU brandy imports. "Can they persuade the EU to roll back some of the measures that have been imposed?" he added, reflecting the broader implications of this decision.
The European Commission, in response, acknowledged Beijing's announcement and emphasized its commitment to closely monitoring the situation. The EU executive expressed skepticism about the merits of the anti-dumping investigation, stating that the inquiry's basis appeared "questionable." The Commission vowed to ensure that World Trade Organization (WTO) rules are followed and indicated its readiness to take necessary actions to protect EU exporters if required.
France, the primary target of China's brandy probe due to its substantial role in EU-China trade, especially in the luxury goods sector, has a significant stake in these developments. French distillers accounted for 99% of China's brandy imports last year, making them particularly vulnerable to any future tariff impositions. Beyond brandy, French exports of dairy products to China, also under investigation, totaled €145 million ($160 million) last year, representing about half of the EU's total exports in that category.
The French cognac industry, deeply concerned about the potential long-term impacts, reacted cautiously to Beijing's decision. The Bureau National Interprofessionnel du Cognac (BNIC) issued a statement acknowledging the temporary nature of the reprieve but stressed the significant risk if tariffs were eventually imposed. "We understand that the duties that could be applied to our products at the end of the procedure would average 34.8%. If imposed, such duties would heavily impact Cognac exports to China, a market that alone accounts for 25% of our exports," the BNIC said. The association urged both France and the EU to engage in negotiations to prevent these tariffs from being implemented.
The market reacted swiftly to the news, with shares in French spirit makers initially surging. Pernod Ricard saw its stock rise by 4.2%, while Remy Cointreau's shares jumped nearly 6%. Italy's Campari also experienced a temporary surge, with its shares automatically halted in Milan after a 4.5% rise. However, as the full implications of Beijing's statement became clear, these gains were partially pared back.
Amid this backdrop, Pernod Ricard's Chief Executive Officer, Alexandre Ricard, addressed the situation during the company’s annual results presentation. He expressed caution regarding the Chinese market, noting that the tariff decision seemed provisional and could change in the future.
The decision to refrain from imposing immediate tariffs on brandy is part of a broader context of trade tensions between China and the EU. In addition to the brandy probe, Beijing has recently launched anti-subsidy investigations into EU dairy and pork products, further complicating the trade landscape. The dairy investigation, notably, was initiated the day after Brussels announced its revised tariff plan for Chinese EVs, underscoring the interconnected nature of these disputes.
As both sides continue to navigate these complex negotiations, Beijing's decision to hold off on brandy tariffs may provide temporary relief but leaves the door open for future trade confrontations. The outcome of these ongoing talks will likely shape the future of EU-China trade relations across multiple industries.
(Source:www.marketscreener.com)
China's commerce ministry reported that European distillers had been selling brandy in China's vast consumer market at a margin ranging from 30.6% to 39%, resulting in damage to its domestic industry. However, the ministry chose not to impose immediate anti-dumping measures, signaling that while tariffs remain a possibility, they will not be enforced "for the time being."
The timing of this decision is significant, given the ongoing trade disputes between China and the EU, particularly around the automotive sector. The European Commission is set to vote in October on a proposal to impose additional duties of up to 36.3% on Chinese-made electric vehicles (EVs). China's decision to hold off on brandy tariffs could be interpreted as a strategic maneuver aimed at influencing the EU's stance on these proposed duties.
"This looks like a negotiation tactic from China," said Barclays analyst Laurence Whyatt, who anticipates a connection between the EU’s potential tariffs on Chinese EVs and China’s actions regarding EU brandy imports. "Can they persuade the EU to roll back some of the measures that have been imposed?" he added, reflecting the broader implications of this decision.
The European Commission, in response, acknowledged Beijing's announcement and emphasized its commitment to closely monitoring the situation. The EU executive expressed skepticism about the merits of the anti-dumping investigation, stating that the inquiry's basis appeared "questionable." The Commission vowed to ensure that World Trade Organization (WTO) rules are followed and indicated its readiness to take necessary actions to protect EU exporters if required.
France, the primary target of China's brandy probe due to its substantial role in EU-China trade, especially in the luxury goods sector, has a significant stake in these developments. French distillers accounted for 99% of China's brandy imports last year, making them particularly vulnerable to any future tariff impositions. Beyond brandy, French exports of dairy products to China, also under investigation, totaled €145 million ($160 million) last year, representing about half of the EU's total exports in that category.
The French cognac industry, deeply concerned about the potential long-term impacts, reacted cautiously to Beijing's decision. The Bureau National Interprofessionnel du Cognac (BNIC) issued a statement acknowledging the temporary nature of the reprieve but stressed the significant risk if tariffs were eventually imposed. "We understand that the duties that could be applied to our products at the end of the procedure would average 34.8%. If imposed, such duties would heavily impact Cognac exports to China, a market that alone accounts for 25% of our exports," the BNIC said. The association urged both France and the EU to engage in negotiations to prevent these tariffs from being implemented.
The market reacted swiftly to the news, with shares in French spirit makers initially surging. Pernod Ricard saw its stock rise by 4.2%, while Remy Cointreau's shares jumped nearly 6%. Italy's Campari also experienced a temporary surge, with its shares automatically halted in Milan after a 4.5% rise. However, as the full implications of Beijing's statement became clear, these gains were partially pared back.
Amid this backdrop, Pernod Ricard's Chief Executive Officer, Alexandre Ricard, addressed the situation during the company’s annual results presentation. He expressed caution regarding the Chinese market, noting that the tariff decision seemed provisional and could change in the future.
The decision to refrain from imposing immediate tariffs on brandy is part of a broader context of trade tensions between China and the EU. In addition to the brandy probe, Beijing has recently launched anti-subsidy investigations into EU dairy and pork products, further complicating the trade landscape. The dairy investigation, notably, was initiated the day after Brussels announced its revised tariff plan for Chinese EVs, underscoring the interconnected nature of these disputes.
As both sides continue to navigate these complex negotiations, Beijing's decision to hold off on brandy tariffs may provide temporary relief but leaves the door open for future trade confrontations. The outcome of these ongoing talks will likely shape the future of EU-China trade relations across multiple industries.
(Source:www.marketscreener.com)
