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China announces duties up to 34.9% on EU brandy producers

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Duties come into effect on Saturday for five years

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Major cognac producers spared if they sell at minimum

price

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Cognac makers say caught in wider dispute over China-made

EVs

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EU says tariffs are unfair, unjustified

By Casey Hall and Tassilo Hummel

SHANGHAI/PARIS, July 4 (Reuters) - China spared major

cognac producers Pernod Ricard, LVMH and Remy Cointreau from

hefty duties on EU brandy on Friday, a rare bright spot at a

time of trade tensions between Brussels and Beijing as the two

sides row over tariffs on Chinese-made EVs.

China will from Saturday levy duties of up to 34.9% for five

years on brandy originating in the European Union, most of it

cognac from France, the Chinese Commerce Ministry said in a

final ruling of an investigation lasting more than a year.

But most of France's cognac industry including big brands

LVMH-owned Hennessy and Remy Martin will be exempt

from the duties provided they sell at a minimum price, the

ministry said in a statement. It did not disclose the minimum

prices.

Beijing launched its anti-dumping probe on EU brandy in

January last year, in what was widely viewed as retaliation for

the EU's decision to impose big import tariffs on China-made

EVs.

French cognac makers generate global exports of $3

billion a year combined. With premium aged bottles of the liquor

selling for hundreds of dollars, they have complained they are

collateral damage in the broader trade row between Brussels and

Beijing.

In addition to the reprieve, China's commerce ministry will

also give back deposits made by brandymakers since October 2024,

when provisional duties were imposed. The refund issue, which

weighed particularly heavily on smaller producers, was one of

the sticking points in months-long negotiations, two industry

sources said.

China is the world's biggest market for cognac in value

terms.

Remy Martin-owner Remy Cointreau said in a

statement that the deal on minimum price commitments constituted

"a substantially less punitive alternative" thus enabling "the

strengthening of some investments in China".

Pernod Ricard said it regrets the increase in the

cost of operating in China but additional costs are

significantly less than would be the case if tariffs had been

made permanent.

LVMH and Campari did not immediately

respond to requests for comment.

There was little sign that the rift between China and the EU

was easing.

Olof Gill, the European Commission's spokesperson for trade,

said the tariffs were unfair and unjustified.

WANG AND MACRON

China's Foreign Minister Wang Yi is visiting Europe this

week seeking to lay the groundwork for a summit between EU and

Chinese leaders later this month, with the EV dispute and

China's curbs on the export of rare earths high on the agenda.

At a meeting with French President Emmanuel Macron on

Friday, Wang said China and Europe have resolved the brandy

issue via friendly consultations, state news agency Xinhua

reported.

Wang said he hoped France, as a core major power in the

European Union, will urge the EU to properly address China-EU

trade and economic disputes and actively respond to China's

concerns, the report said.

Asked about media reports that China was poised to shorten

the summit to a single day instead of two, a European Commission

spokesperson said the programme was still being finalised.

"Nothing has been cancelled because nothing has been

announced and no final programme has been agreed yet," the

spokesperson added.

Last week, Reuters reported that French cognac makers had

reached a tentative deal on minimum import prices for the

Chinese market, but that China would only finalise the deal if

progress was made regarding EU tariffs on Chinese-made EVs.

INVESTOR RELIEF

Shares of French spirits makers were mixed as investors

digested the ruling, with many relieved Beijing had agreed to

drop tariffs in return for price commitments, likely reviving

sales that have suffered due to the tariffs.

Remy Cointreau shares were up 0.54% and Pernod was down

0.3%, having regained some ground lost earlier in the day. LVMH

was down 1.5%.

Monthly cognac exports to China have fallen by as much as

70% due to the trade dispute, according to data from the Bureau

National Interprofessionnel du Cognac (BNIC), a French cognac

industry group.

Citi analysts said they expected upgrades to earnings

forecasts for Pernod and Remy.

Remy, which makes 70% of its sales from cognac, mostly

in the U.S. and China, said it would update its annual guidance

when it releases quarterly numbers on July 25.

European spirits makers have also been grappling with a

downturn in sales in the United States where inflation has

deterred drinkers from pricier spirits. President Donald Trump

has also threatened tariffs on imports from the EU.

The minimum price pledges could translate into some

price increases, but they will likely be small and it is too

early to tell whether there could be an impact on shelf prices,

a senior industry source with knowledge of the China

negotiations said.

"The French government has been raising this repeatedly with

the Chinese government and saying this is a major bone of

contention," said a senior French industry source with knowledge

of the China negotiations, who declined to be named because of

the sensitivity of the matter.

"I think both sides, France and China, did not want this to

get out of hand. They wanted to find a resolution."

BNIC said that the deal for minimum price commitments will

be "less unfavourable" than anti-dumping duties, but still worse

for its members than the historical pre-investigation norm.

"This is why we renew our call to the French government and

the European Commission to reach a political agreement with the

Chinese authorities as soon as possible to return to a situation

without anti-dumping duties," BNIC said in a statement.