On the same day when the European Union’s temporary tariffs on Chinese electric cars took effect, the Chinese government announced on Friday (July 5) the next step in the anti-dumping investigation on imported European brandy, further intensifying trade tensions between China and the EU.
According to Reuters on Friday, sources revealed that companies including Pernod Ricard, owner of major brands Martell; Remy Cointreau, owner of Remy Martin; and LVMH, owner of the major brand Hennessy, received subpoenas overnight to attend a hearing in Beijing.
On Friday, China’s Ministry of Commerce stated that a hearing would be held on July 18 to discuss the investigation into European brandy producers accused of selling brandy to China at prices below market value.
The previous day, a spokesperson for China’s Ministry of Commerce stated at a press conference that the EU and Beijing should continue negotiations before the EU confirms tariffs as high as 37.6% on Chinese electric vehicle imports.
Sources said that the European brandy industry has expressed willingness to participate in such hearings, with company representatives expected to attend to answer questions. They may also present arguments against the tariffs.
As reported by Swissinfo, the hearing was requested by brandy brands like Martell, French company Hennessy, Remy Martin, and other stakeholders.
The Chinese government has repeatedly urged the EU to cancel its tariffs on electric vehicles from China and expressed readiness to engage in negotiations, while also threatening to take extensive retaliatory measures.
Amid the EU investigation into whether Chinese electric car manufacturers benefit from unfair government subsidies, China initiated a confrontational anti-dumping investigation in January on European brandy imports to China, accusing European producers of selling at prices below market rates. In June, a second investigation was launched on pork imports from 27 countries.
China’s state media Global Times reported that Chinese officials are considering launching a countervailing investigation on imported dairy products from Europe and imposing tariffs on high-displacement gasoline vehicles manufactured in Europe.
The temporary window for the electric vehicle tariffs lasts for four months. The EU stated on Thursday that the countervailing investigation on Chinese electric vehicles will continue until November 2, with a possibility of imposing final tariffs lasting five years.
Analysts suggest that China’s selection of brandy and pork is aimed at pressuring countries like France and Spain to lobby the EU Commission to cease imposing tariffs.
French cognac producers expressed concerns that the investigation may be about wider trade disputes rather than the alcoholic beverage market. Cognac is a type of brandy produced in the Cognac region of France and accounts for a significant portion of brandy imports into China.
The Spanish Minister of Economy warned the EU not to be naive in negotiations regarding electric vehicle tariffs with China.
Italy also indicated support for imposing tariffs and sent its Minister of Economic Development, Adolfo Urso, to Beijing. It was reported that he met with China’s Minister of Industry and Information Technology, Jin Zhuanglong, on Friday in Beijing.
China had hoped the EU would cancel implementation of the restrictive measures before July 4, but the EU Commission stated at the time that China needed to present a roadmap during talks to address the issue of “harmful subsidies” in the electric vehicle industry.
The EU Commission’s investigation found that forms of subsidies received by Chinese car manufacturers included low-cost loans, land, and direct incentives for the sale of electric vehicles. They also received assistance in battery costs, the most expensive component in electric vehicles.
For example, SAIC and Geely obtained batteries at low prices while BYD, although producing batteries, received subsidies for battery materials, especially lithium.
SAIC Group released a statement on Friday stating they would formally request a hearing from the EU Commission on their temporary tariffs, adding that the EU’s investigation involves commercially sensitive information.
The EU detailed in its investigation report the lack of cooperation from the Chinese government and state-owned automaker SAIC in the investigation. As a result, SAIC Group faces the highest tariff of 37.6%, while BYD and Geely face lower tariffs of 17.4% and 19.9%, respectively.
Shares of Chinese electric vehicle manufacturers listed in Hong Kong fell on Friday, with Geely Auto leading the decline, dropping by 4.1% to HK$8.34, the lowest since March 7.
Chinese brands MG and NIO stated on Thursday that they may consider raising prices in Europe this year in response to the EU’s restrictive measures.
The EU Commission conducting the investigation stated that the aim of the countervailing investigation is to prevent unfair competition and market distortions.
Meanwhile, the EU is also investigating a series of Chinese government over-subsidization practices, including whether Chinese clean technology producers are dumping subsidized goods into the EU market and if Chinese companies operating within the EU are unfairly benefiting from subsidies.