Escalating Trade Tensions

Recent trade measures have intensified tensions between China and the European Union. In response to Brussels imposing new tariffs on Chinese electric vehicles, Beijing has retaliated by launching an anti-dumping investigation targeting European brandy imports.

Anti-dumping Investigation on European Brandy in China

Last week, China announced a public hearing scheduled for July 18th to escalate its anti-dumping investigation on European brandy imports. This move coincides with the EU's application of provisional tariffs, reaching up to 37.6%, on Chinese electric vehicles.

The investigation by China aims to determine if European producers like Martell, Rémy Martin, and Hennessy are selling their products below market prices. These producers will have the opportunity to challenge these allegations during the upcoming hearing in Beijing. The request for this meeting came from European cognac houses such as Martell and Société Jas Hennessy & Co., signaling their commitment to defending their market position.

These actions reflect the deteriorating trade relations between Brussels and Beijing. Earlier in the year, Beijing initiated a similar investigation into brandy imports and followed it up with another investigation into pork shipments from the EU in June.

While China has expressed its willingness to engage in negotiations to prevent a further escalation of tariffs, it has also made clear its readiness to take any necessary steps to safeguard its industries. The coming four months, during which tariffs on electric vehicles will remain provisional, are crucial. Both parties are expected to engage in intense discussions to seek a mutually acceptable resolution.

Consequences and Reactions of Stakeholders

China swiftly responded to the EU's imposition of provisional tariffs on electric vehicles by intensifying its investigations into European brandy imports and initiating a new investigation into European pork. This move affects exports from France and Spain, two key supporters of the EU's tariff actions.

Furthermore, China is contemplating additional investigations into dairy products and internal combustion engine cars from Europe. This approach appears to be targeted at pressuring countries such as Germany, where a significant portion of automakers' sales originate from China. By doing so, China aims to create divisions among European nations supporting the tariffs while demonstrating its determination to safeguard its economic interests.

On the EU side, the confirmation of the 37.6% provisional tariffs on Chinese electric vehicles has come into effect. Manufacturers now have a four-month window to provide feedback on these measures. Chinese companies like SAIC Motors, Geely, and BYD are already witnessing initial repercussions, with their shares in Hong Kong experiencing a decline.

Analysts warn that if a solution is not reached, this escalation could severely disrupt the economy and trade relations between China and the EU. The situation is further complicated by Beijing's accusations against Brussels, alleging espionage through anti-dumping investigations, heightening tensions and uncertainties within industries on both sides.

As negotiations persist between China and the EU, the ultimate outcome of this tariff standoff remains uncertain. Industries closely watch each development, fully aware that the decisions made could have significant implications on the economy, trade flows, and global economic stability.