China to impose duties of up to 34.9% on EU brandy, starting July 5

China's Commerce Ministry has finalized anti-dumping duties on EU brandy, imposing tariffs of up to 34.9% for five years starting July 5, 2025, though some firms like Pernod Ricard's Martell and Remy Cointreau's Remy Martin are exempt if minimum price commitments are met. This ruling is a direct consequence of the broader trade dispute with the EU over tariffs on Chinese electric vehicles, with French cognac exports to China already down by as much as 70%. The decision underscores the escalating trade tensions impacting key luxury goods sectors and highlights the ongoing tit-for-tat measures between Beijing and Brussels.

Analysis

China has finalized a five-year anti-dumping tariff of up to 34.9% on European Union brandy, set to begin on July 5, 2025. This measure is a direct retaliatory action within a broader trade dispute initiated by the EU's imposition of tariffs on Chinese-made electric vehicles. The impact of this conflict is already severe, with monthly cognac exports to China—the spirit's most valuable market—having declined by as much as 70% according to the BNIC industry body. A critical mitigating factor is that major producers, including Pernod Ricard's Martell and Remy Cointreau's Remy Martin, will be exempt from the highest duty rates provided they adhere to minimum price commitments, a detail that partially insulates them from the worst of the fallout. This geopolitical pressure is compounded by deteriorating market conditions in the United States, cognac's largest market by volume, where sales have slowed due to inflation and economic uncertainty, creating dual headwinds for the sector's profitability and growth outlook.

Key Decisions for Investors

• Investors should differentiate between EU brandy producers, as companies like Pernod Ricard and Remy Cointreau that secured minimum price commitments are partially insulated from the full 34.9% tariff, creating a potential performance divergence within the sector.
• Given that cognac exports to China have already fallen by as much as 70%, the formalization of these duties confirms a severely challenged market, and investors must scrutinize whether current valuations adequately reflect this new five-year reality of depressed demand.
• The primary risk is geopolitical, so closely monitor the broader EU-China EV trade dispute for signs of escalation or de-escalation, while also factoring in the separate headwind of slowing sales in the key U.S. market.