Bourbon, Scotch and Cognac caught in trade dispute crossfire

As President Trump weighs what level of tariffs to impose on drinks imported to the United States, further evidence has emerged of how producers are being used as pawns in international politics.

First came the news that India has slashed tariffs on Bourbon to 100% from 150% following a meeting last week at the White House between Trump and India’s Prime Minister Narendra Modi.

While Bourbon is not a huge market in India, the move will give price advantages to producers such as Brown-Forman (Jack Daniels) and Suntory (Jim Beam) over importers of Scotch whisky especially.

Britain has long urged Delhi to enter a free trade agreement which would benefit distillers of Scotch but so far the Starmer government seems to have made no more progress than its predecessor.

It has long been hinted in Delhi that the return to India of convicted fraudsters such as Vijay Mallya who have fled to Britain might go some way to advancing talks.

Cognac caught in China EU-trade tensions

Then at the weekend came a further illustration of the depth of the problems being faced by Cognac houses in China.

In later August China’s Ministry of Commerce issued a preliminary ruling that EU brandy was being dumped into the Chinese market and subsequently required importers to pay deposits ranging from 30.6% to 39.0% on shipments.

In November this was changed to allow importers to use bank guarantees instead of cash deposits, effectively deferring any immediate financial burden.

These actions are part of an anti-dumping investigation into EU brandies (98% Cognac) as part of a trade spat between Brussels and Beijing.
Since then, however, Vino Joy reports that China’s largest duty-free operator has removed from its lists Cognac produced by Martell, Hennessy, and Rémy Cointreau, in what appears to be an escalation of trade tensions between the EU and the People’s Republic.
All brandies have disappeared from China Duty-Free Group’s online platform except for a few domestically produced brands.

One anonymous importer based in Guangdong reportedly confirmed that customs clearance for Cognac had been halted.

Clearances were at normal levels until November, but they ceased in December. However, there has been no official comment on rumours Beijing tightened its attack on Cognac, which has minimal impact on Chinese consumers but is inflicting much pain on a small but vocal region of France, the EU member that has been the most outspoken about China.

Parallels to China’s Australian wine tariffs

Cognac exports to China in December were 75% below those in the same month in 2023, reflecting a trend of rapidly falling demand throughout last year.

In addition, Bloomberg has reported that Pernod Ricard, Rémy Cointreau, and Hennessy have been unable to restock duty-free travel hubs in China since early December, thus hitting the crucial sell in advance of the Chinese New Year celebrations.

Beijing’s actions against Cognac have direct parallels with China’s imposing tariffs in 2020 of up to 212% on Australian wines as part of a diplomatic row over human rights and the origins of the coronavirus pandemic.

They were removed three years later when the new Australian government took a less critical line of China.

Related news

Spirits and wine once again 'collateral damage' in transatlantic trade tariffs

EU drops trade tariffs on US whiskey - but UK barriers remain

Campaign launched to support Australian winemakers hit by Chinese trade tariffs