Brandy produced in the European Union and sold in China will be subject to an additional charge of up to 39 percent from October 11. This is the first response from Beijing to the tariffs on Chinese-made electric vehicles (EVs) coming into the EU, which will run as high as 45 percent on some models.
Those tariffs will come into play at the start of next month. The Chinese Commerce Ministry in Beijing has also said they are investigating a potential anti-trust case and subsequent tariffs against EU-made petrol cars with large engines. That could have enormous ramifications for German car manufacturers who have significant business interests in exporting to China
The EU Commission which pushed the tariffs on Chinese EVs, say that Beijing provides too much in state subsidies to Chinese manufacturers - allowing them to produce vehicles far cheaper than in the EU. The Chinese Commerce Ministry Decried the tariffs from Brussels as "unfair, non-compliant and unreasonable.”
French brandy exports to China was worth $1.8 billion in 2023. /Mike Segar/Reuters
In response, Beijing has targeted brandy imports first. The vast majority of Chinese brandy imports from the EU come from France. French President Emanuel Macron had been one of the strongest voices of support for the EV tariffs on China. The export of French brandy to China was worth $1.8 billion in 2023 and the new duties on the spirit will be in place on October 11.
The tariffs saw major brandy producers stock price tumble. French distiller Remy Cointreau SA was down 9.3 percent, Hennessy Cognac owner LVMH Moët Hennessy Louis Vuitton SE plummeted 6.8 percent while Pernod Ricard SA dropped 4.6 percent.
A NIO ET5 car model and the NIO EP9 sports car at the showroom of the Chinese premium smart electric vehicle manufacture in Berlin. /Annegret Hilse/Reuters
The news that Beijing was looking next towards petrol vehicles also saw BMW AG shares fall more than 3 percent, while Mercedes-Benz Group AG dropped about 2 percent.
German car manufacturers are hoping that a solution other than tariffs can be worked out. The EU Commission and the Chinese side continue to speak to try and find a compromise other than the increased duties voted on by member states last week.
The export of cars and car parts from Germany to China was worth over $29 billion last year.
Mercedes has already issued a statement to the markets reviewing its 2024 profit projections, while VW continues to find itself in financial trouble. The Wolfsburg-based auto colossus has had to issue two profit warnings in the last three months and is seriously considering closing production facilities in Germany for the first time in the company's history.
The news doesn't get much better for the wider German economy as Vice Chancellor and Economy Minister Robert Habeck addressed the press on Wednesday. The Green Party politician said the country was significantly revising its forecasts and expected the German economic output to contract by 0.2 percent by the end of 2024.
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