Automotive News Europe — 2024-10-08
Automotive Industry
China is studying raising tariffs on large-engine vehicles and will start collecting duties on brandy from Europe, escalating a trade spat after the European Union decided to impose tariffs on Chinese electric vehicles.
"China is studying measures including raising the tariffs on imported gasoline cars with a large engine capacity," the Ministry of Commerce said in a statement on Oct. 8, adding that the measure will safeguard the rights of Chinese companies.
Higher tariffs would hit German automakers hardest. German exports of vehicles with engines of 2.5 liters or larger to China reached $1.2 billion last year.
In a separate statement, the ministry said importers of brandy from the EU will have to pay a deposit of as much as 39% of the value of the brandy effective Oct. 11.
The actions against European car and brandy exporters come after the EU decided last week to impose tariffs up to 45% on imports of Chinese electric vehicles for five years. A final decision is expected by Oct. 31.
Talks between the two parties are continuing, and the Chinese announcements may represent an attempt by Beijing to put pressure on Brussels to find an alternative to the tariffs.
Shares of European carmakers and brandy companies tumbled. BMW shares fell 3%, while Mercedes-Benz Group dropped 2.6%. Remy Cointreau slumped more than 8%.
Chinese state media had hinted that Beijing could raise tariffs on car imports in response to the EV tariffs, and this is the first official confirmation by the ministry.
Most of China's brandy imports come from France, which voted for the tariffs on Chinese cars. The statement from the ministry specifically mentioned European spirits makers controlled by Remy Cointreau and Pernod Ricard, among others.
France was seen as the target of Beijing's brandy probe due to its support of tariffs on China-made EVs.
China announced an anti-dumping probe into European brandy in January this year after the start of the EU investigation into its electric vehicle subsidies.
French brandy shipments to China reached $1.7 billion last year and accounted for 99% of the country's imports of the spirit.
China's commerce ministry previously said it had found that European distillers had been selling brandy in its 1.4 billion-strong consumer market at a dumping margin in the range of 30.6% to 39% and that its domestic industry had been damaged.
French President Emmanuel Macron told a conference in Berlin last week that China's brandy investigation was without basis, while EV tariffs were needed to preserve a level playing field, describing Beijing's probe as "pure retaliation."
The European Commission did not immediately respond to a request for comment.
The EU's new tariffs on China-built electric vehicles range from 7.8 for Tesla, which is low because the company gets few subsidies in China, to as high as 35.3% for automakers that did not co-operate with the EU's anti-subsidy probe.
When the existing 10% tariff applied to imports in the EU is included, the rates will be as high as 45%.