China reveals next steps in EU brandy probe as EV tariffs take effect

By Joe Cash

BEIJING (Reuters) -China announced the next step in its anti-dumping investigation into European brandy imports on Friday, ramping up tensions on the same day the European Commission’s provisional tariffs on Chinese-made electric vehicles take effect.

While a Commerce Ministry spokesperson stressed at a news conference on Thursday that Brussels and Beijing should stay at the negotiating table ahead of the bloc confirming tariffs of up to 37.6% on Chinese-made EVs, the prospect of retaliation was kept alive by a reference to another probe into EU pork imports.

The Commerce Ministry then said on Friday it would hold a hearing on July 18 to discuss an ongoing investigation into claims that European brandy producers are selling into China at below market rates.

The hearing was requested by brandy houses Martell, Societe Jas Hennessy & Co., Remy Martin and other stakeholders, according to the ministry’s statement.

China has repeatedly called on the EU to cancel its EV tariffs, expressing a willingness to negotiate. It has said it does not want to be embroiled in another tariff war – with U.S. tariffs on its goods continuing to sting – but that it would take all steps to protect Chinese firms.

There is a four-month window during which the EV tariffs are provisional and intensive talks are expected to continue between the two sides as Beijing threatens wide-ranging retaliation.

Beijing in January opened a tit-for-tat anti-dumping investigation into European brandy imports and in June launched a second probe into pork shipments from the 27-strong bloc, while Brussels looked into whether China’s EV manufacturers benefited from unfair subsidies.

The state-backed Global Times newspaper has reported that officials are also considering opening an anti-subsidy probe into European dairy imports and imposing tariffs on large-engined petrol cars manufactured in Europe.

Authorities have previously dropped hints about what they might do next through state media commentaries and interviews with industry figures.

Analysts say China chose brandy and pork to persuade France and Spain, who have been among the firmest backers of EU curbs, to join the likes of Germany, whose automakers made a third of their sales last year in China and reportedly wants to lobby the Commission to stop the tariffs.

‘SHOW SINCERITY’

After the Commission confirmed the provisional tariffs would take effect from Friday, the Global Times published an editorial urging Brussels to consider European automakers’ opposition to the curbs, as well as a separate article calling on Brussels to “show sincerity” in talks to find a negotiated settlement.

The newspaper also called attention to American EV maker Tesla (NASDAQ:TSLA)’s manufacturing plant in Shanghai, broadening its call to protest against the tariffs.

Beijing had hoped Brussels would scrap plans to impose the curbs ahead of July 4, but the Commission said at the time that China would need to come to the talks with a roadmap to “addressing the injurious subsidisation” of its EV industry.

Meanwhile, the Chinese side has also accused the Commission of using its anti-dumping probe to snoop on Chinese companies’ supply chains, the efficiency of which Beijing maintains gives it the upper hand in cheaply manufacturing electric cars, among other reasons.

SAIC Motors said in a statement on Friday that it will officially request the Commission holds a hearing on its provisional tariffs, adding that Brussels’ investigation involved commercially sensitive information.

Geely and BYD (SZ:002594) did not immediately respond to a request for comment on whether they would also seek a hearing with the Commission.

Chinese EV makers’ Hong Kong-listed shares fell on Friday, led by Geely Automobile, which dropped 4.1% to HK$8.34, its lowest since March 7.