The threat of raised tariffs on grape-based spirits imported from the European Union into China has been realised, with imposition set for this week.
Just over a month after outlining the potential levels of the new duty rate for armagnac, brandy and cognac shipments, China’s Ministry of Commerce has confirmed the implementation from Friday (11 October). The realisation of the initial threat by MOFCOM follows its conclusion that imported brandy (including cognac) from the EU was being dumped in China and “the domestic relevant brandy industry is threatened with substantial damage”.
Earlier this month, the EU confirmed the application of taxes on electric vehicles from China, prompting trade association the Bureau National Interprofessionnel du Cognac to claim that the French authorities have abandoned us”.
In a subsequent statement yesterday, the BNIC said: “As we have been saying for months, the impact of these taxes would be catastrophic for our industries and our regions. We call on our government to finally take the necessary steps to put an end to this escalation, of which we are hostages and whose outcome is now more threatening than ever.”
Among the cognac brand owners set to be hit hardest are Moët Hennessy, Rémy Martin and Pernod Ricard. In a note to its clients, investment analyst Citigroup estimated sales declines in China for the trio of 20%, 13% and 19%, respectively, if the tariffs were passed on to consumers.
Despite this, Citigroup said it “takes comfort from the fact that the tariffs are not worse than those outlined in August”.
“With uncertainty around whether the tariffs would be imposed now removed, this should be the clearing event that allows spirits stocks to find a floor.”
