In a recent turn of events, Beijing is considering imposing tariffs on European petrol cars as a countermeasure to the European Union’s new levies on Chinese electric vehicles. This follows China’s earlier decision to impose tariffs on EU brandy imports, raising the stakes in the ongoing trade dispute with Brussels.
Starting on Friday, October 11, importers of EU brandy will face tariffs of up to 39%. This decision comes after EU member states voted to tax Chinese electric vehicles just a week earlier. Interestingly, only a couple of months ago, China chose not to implement provisional tariffs on brandy, despite presenting claims of dumping.
The announcement from China has already had a ripple effect on the stocks of European car and brandy producers. For example, BMW saw a 3% drop in its shares before making a slight recovery. Meanwhile, French distiller Rémy Cointreau experienced a decline of over 9%, LVMH, which owns Hennessy Cognac, dropped by 6.8%, and Pernod Ricard fell by 4.6%.
This move comes on the heels of recent diplomatic efforts by French President Emmanuel Macron, who sought to bolster relations with Chinese President Xi Jinping during a recent visit to France. During this visit, Macron presented Xi with a rare bottle of Louis XIII Cognac, acknowledging Beijing’s initiation of an anti-dumping investigation into the brandy and commending Xi for his “open attitude” on the inquiry.
Despite these diplomatic overtures, European Commission President Ursula von der Leyen reasserted the EU’s stance on ensuring that China can sell its products in Europe, as long as state subsidies do not undermine local manufacturing.
Permanent EU tariffs are expected to go into effect in November, with ongoing discussions between the two sides. However, insiders from the EU are expressing concerns that Xi may hesitate to make concessions, especially as China’s economic growth increasingly depends on exports of green technologies like electric vehicles, solar panels, heat pumps, and wind turbines.
This trade conflict is also occurring against the backdrop of the potential return of Donald Trump to the American presidency. Recently, China has called on Washington to lift the sanctions placed on its companies during Trump’s administration in 2018.
Chinese Commerce Minister Wang Wentao has communicated “serious concerns” to U.S. Secretary of Commerce Gina Raimondo regarding these trade restrictions. In light of China’s actions surrounding brandy, the EU has announced plans to challenge these measures at the World Trade Organization, asserting, “We believe that these measures are unfounded, and we are determined to defend EU industry against abuse of trade defense instruments.”
Amid such international tensions, Chinese policymakers are facing domestic pressure to meet growth targets for 2024. Last month, Beijing announced interest rate cuts and promised around $340 billion to support the stock market, although further stimulus measures were withheld in a recent announcement.
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