Beijing steps up probe into EU brandy imports as trade tensions deepen after tariffs on Chinese EVs

Hong Kong (CNN) — Beijing has intensified its anti-dumping investigation into imports of European brandy.

The Chinese commerce ministry will hold a hearing on July 18 to discuss the probe into claims that European producers are selling brandy in China at artificially low prices, according to a statement from the ministry Friday.

The hearing will focus on the reasons behind lower prices and any damage they’ve caused to the Chinese liquor industry, the ministry said.

The announcement came on the same day as the European Commission’s additional provisional tariffs on imports of Chinese-made electric vehicles came into effect. The tariffs, ranging from 17.4% to 37.6%, are seen as a necessary move by the EU to deter a flood of cheap Chinese cars built with what it deems unfair support from the government.

On Saturday, the China Association of Automobile Manufacturers, a state-backed auto association, said it was “strongly dissatisfied” with the additional EU tariffs on Chinese EVs and considered them “unacceptable.”

Major stakeholders are bracing for retaliatory moves by Beijing.

China’s probe into Europe’s cognac is a tit-for-tat reaction to EU action on Chinese EVs, said Jean-Jacques Guiony, chief financial officer of LVMH (LVMH), at an economic conference on Saturday, according to a Reuters report. LVMH owns major cognac brand Hennessy.

“You can be a regional player with a very particular role in globalisation, as in our case, and regardless find yourself hostage to a number of conflicts that have nothing to do with your activities,” he said.

French congac producers will be hit hard if China imposes any tariffs after the probe. Last year, 99% of China’s imported brandy came from France, reaching $1.74 billion in value, according to Chinese customs data.

The Chinese government announced the anti-dumping probe against European brandy in January, in what was seen as a retaliation against the EU’s decision to investigate whether Chinese EV manufacturers receive unfair state subsidies.

The European Commission, the EU’s executive arm, announced last month that it would hike tariffs on Chinese EVs. Talks between the two sides are expected to continue but, if no agreement is reached, the tariffs will become definitive in November.

The tariffs would become definitive in November if no alternative resolution is reached.

Beijing has said it will take “all necessary measures” to safeguard China’s interests. Apart from brandy, such measures could include retaliatory moves against imports of EU pork.

“China has already launched a targeted anti-dumping probe on pork imports. The findings of an investigation into EU spirits are due early next year but could come anytime,” said Bank of America analysts in a research note Monday.

“Beijing has warned it could hit European agricultural goods, aviation and cars with large engines,” they added.

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