Cognac stocks surge as China delays tariffs
The share prices of major Cognac producers Pernod Ricard, Remy Cointreau and LVMH all jumped by more than 3% as the Paris market closed last Friday.
The French Foreign Minister Jean-Noel Barrot revealed that China had postponed the threatened permanent application of additional customs duties on Cognac for three months. They were due to come into force this week.
“This is a significant first step towards resolving this dispute,” Barrot said.
Europe’s brandy producers (in effect, the Cognac industry) were facing definitive application of duties following an antidumping investigation, which Paris contests.
However, during a visit to Beijing, Barrot said: “I’m pleased to confirm that at the highest levels, I was assured this scenario will not happen immediately. Instead, the conclusions of the investigation will be postponed for three months.”
Brandy industry sees hope
Barrot acknowledged that the final outcome remains uncertain, but he was optimistic..
“This delay is a crucial first step, and we’re committed to taking further actions to fully resolve this issue,” he said.
“In three months, the Chinese authorities will make decisions based on the investigation’s findings,” he added. “We’ll continue our efforts in both Paris and Beijing, thanks to the hard work of our ambassador and all stakeholders involved”.
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Since October, European brandy exports to China have faced duty penalties in response to EU tariffs on Chinese electric vehicles, which were imposed following claims of unfair competition.
China and EU trade tensions
This measure has particularly hit Cognac producers, who rely on exports for 98% of their sales. Cognac constitutes the majority of EU brandy exports to China, its second largest export market.
In February, the Cognac industry said it was losing €50 million a month due to the anti-dumping duties and appealed for government support.
Meanwhile, the EU’s alcohol producers, including those in Cognac, are anxiously awaiting the outcome of further talks with the Trump administration about duties.
Tariff disputes continue
Again the drinks producers are innocently caught in the crossfire of a trade war over steel and aluminium.
America was due to reintroduce 50% tariffs this week after talks with the Biden-Harris Administration petered out. In retaliation Brussels was due to hit bourbon by the same amount, with Trump threatening escalation to 200% on European alcohol if the EU did so.
Noises coming out of Kentucky and Tennessee are cautiously positive that progress can be made in the next fortnight, but nothing is certain.
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