As a swift response to the European Union’s recently imposed tariffs on Chinese electric cars, China has announced new anti-dumping policies towards EU brandy imports, exacerbating the ongoing trading conflict between the two entities. As of Friday, a security deposit will be required from EU brandy importers, as dictated by the Chinese commerce ministry.
Following the pronouncement on Tuesday, the stocks of several luxury brands, including those from the French luxury group LVMH who owns Hennessy cognac, plummeted sharply. LVMH saw a drop of 4.3%, Martell’s owner Pernod Ricard encountered a 2.7% fall, and Remy Cointreau nudged a nearly 4.8% drop.
There was also a downturn noted in other luxury stocks like Kering, owner of Gucci, Hermes, Cartier’s parent company Richemont, and Hong Kong-based Prada. Investors are understandably concerned that the bout between EU and China could affect other sectors adversely.
The unprecedented trade conflict between China and Europe in the past decade has seen recent escalations. The EU’s decision last Friday to sanction a hefty hike in tariffs on Chinese electric vehicles seems to have triggered this latest exchange.
China has not only begun anti-dumping examinations into European dairy and pork exports but also registered a protest against the EU tariffs with the World Trade Organisation as the EU-China dispute spreads from automobile to agriculture.
Despite facing opposition from EU states like Germany and Hungary, the increased tariffs on Chinese electric vehicles were adopted last week. This was the result of a prolonged investigation helmed by the President of the European Commission, Ursula von der Leyen. It was asserted by EU authorities that the tariffs were essential to secure the EU’s manufacturers against the competition posed by Chinese-made EVs, which were allegedly unduly subsidised by Beijing.
These punitive measures towards brandy producers, announced on Tuesday by China, are a marked departure from their previous position in late August. At that point, despite concluding that these producers had flooded the Chinese market with their products, the commerce ministry chose not to enforce new penalties immediately.
Key influencers in the decision to investigate electric vehicles were French car officials and executives; France supported the increased tariffs last week. Despite indications from Beijing and Brussels of ongoing discussions over electric vehicle tariffs, last week’s proceedings have stoked fears of more retaliation from China.
China has previously criticised the EU’s electric vehicle tariffs as protectionist, violating international trading norms, and hindering the global effort to combat climate change. – Copyright The Financial Times Limited 2024.