The Chinese side is studying raising tariffs on imported large-displacement fuel vehicles and will start imposing tariffs on European exports of brandy after EU member states voted to adopt the draft final ruling on the EU’s countervailing case on electric vehicles, which may further escalate the trade conflict between China and Europe.
On October 8, China’s Ministry of Commerce said in a statement that the Chinese side is studying measures such as raising tariffs on imported large-displacement (engine displacement greater than 2.5 liters) fuel vehicles to firmly safeguard the legitimate rights and interests of Chinese industries and enterprises.
According to calculations by the Passenger Association, the total amount of passenger cars with an engine displacement of more than 2.5 liters exported from Europe to China each year has already reached 18 billion U.S. dollars, a figure that is higher than the amount of China’s exports of electric cars to Europe in 2023. If China raises its temporary tariff rates, European auto exports to China will take a hit.
Among them, German automakers may bear the brunt. Last year, Germany’s exports of cars with a displacement of 2.5 liters and above to China reached 1.2 billion U.S. dollars, according to China Customs data. Also according to Stifel Research, such cars exported to China accounted for about 1 percent of Volkswagen’s total sales, BMW’s 2 percent, Mercedes’ 4 percent, and Porsche’s 17 percent.
In addition to this, the Ministry of Commerce said in another statement that on October 8, China decided in accordance with the law to implement provisional anti-dumping measures on imports of relevant brandy originating in the EU. Since Oct. 11, import operators should provide corresponding deposits to the Customs when importing the relevant brandy originating from the EU.
This has dealt a blow to French brandy brands such as Hennessy and Remy Martin, as most of the brandy currently imported into China comes from France. Last year, French brandy exports to China amounted to $1.7 billion, accounting for 99% of China’s brandy imports.
After the news was announced, shares of European automakers and brandy companies fell. Among them, the shares of BMW Group fell 3%, and the shares of Mercedes-Benz Group dropped 2.6%. French wine group Remy Cointreau (Remy Cointreau) shares fell more than 8%.
With current negotiations between China and Europe continuing and a window of time before the final ruling, the latest statement from China could be a way of pressuring the EU side to find an alternative to tariffs on electric cars.