European Union Increases Tariffs on Imported Chinese Electric Vehicles; French Cognac Producers Express Concerns

On Wednesday, June 13, the European Commission announced plans to impose higher tariffs, up to 38%, on imported electric vehicles from China starting mid-July. This move, described as 'protectionism' by Beijing officials, comes less than a month after the U.S. quadrupled tariffs on Chinese electric vehicles to 100%. Following this decision, a spokesperson for China's Foreign Ministry warned that this action would disrupt the automotive supply chain and ultimately harm European interests. The EU's executive arm stated that the decision to quadruple tariffs from the current 10% was based on various investigations, some of which are still ongoing. EU officials claim the new tariffs are temporary and contingent on findings from EU investigations regarding subsidies provided by the Chinese government to its automotive companies. After the investigations conclude on November 3, definitive tariffs, which will be enforced for at least five years, will be applied. European officials refer to research conducted last October that indicated the Chinese electric vehicle supply chain 'benefits significantly from unfair subsidies,' and thus, the influx of artificially low-priced Chinese imports poses a clear risk to EU industries. Some of the largest European car manufacturers selling in China, including Germany's BMW, have seen their stock prices decline. The European Commission states that its investigations aim to stop unfair competition and market distortion, and rates can be assessed and applied on a company-by-company basis. Meanwhile, French cognac producers are deeply concerned about the outcomes of China's investigations into European cognac imports. Statistics from the Cognac Trade Office show that in 2023, France had the equivalent of 2 billion bottles of cognac in barrels, 97% of which was for export markets. Calculations by Reuters based on this data indicate that if China's share of cognac exports remains at 19%, it would mean a destination of at least 368.6 million bottles of cognac for China in the future. France exported just over 35 million bottles of cognac to China last year, and if shipments continue at this pace, over 175 million bottles will go to China over the next five years. China has previously initiated 'anti-dumping' investigations regarding 'brandy' imported from the EU, which is seen as a response to broader trade disputes between Beijing and Brussels. Almost all European 'brandy' exported to China is produced in France and generates significant revenue from this Asian market. It is noteworthy that Australian wine exports to China, valued at $1.1 billion in 2019, were nearly completely halted due to high tariffs. Disagreements among European countries regarding China; Xi Jinping arrived in Paris. Senator Rubio: Imposing tariffs on Chinese cars is essential for protecting the U.S. Treasury Secretary: 'Eager' to cooperate with China on mutual interests. The U.S. is on the path to congressional elections; pressure on Biden to take a tougher stance on China is increasing.